British Pound-to-Euro Forecast: GBP Retreats After Hawkish ECB Rate Hike

Modified: Thursday, 11 June 2026 16:36 BST - Written by Frank Davies

STORY LINK British Pound-to-Euro Forecast: GBP Retreats After Hawkish ECB Rate Hike

The Pound to Euro exchange rate (GBP/EUR) briefly challenged the 1.16 level before slipping back towards 1.1580 after the European Central Bank delivered a widely expected 25 basis-point rate hike.

While the Euro initially drew support from the move, policymakers signalled that further tightening remains firmly on the table, reinforcing expectations that interest rates could rise again as soon as July and limiting Sterling's ability to extend gains.

GBP/EUR Forecasts: Close to Key Resistance

The Pound to Euro (GBP/EUR) exchange rate briefly touched 1.16 on Wednesday before settling close to 1.1590 with a firm underlying Pound tone continuing despite economic and political uncertainty.

Key resistance remains just above 1.16 with scope for notable gains if the pair can break higher.

On a medium-term view, Danske Bank still expects that GBP/EUR will slide to 1.1240 on a 12-month view.

The immediate focus will be on Thursday's ECB policy meeting with strong expectations that the deposit rate will be increased by 25 basis points to 2.25%.

According to ING; “There is also a slight upside risk to the euro tomorrow should the ECB, after a 25bp rate hike, fail to rule out a hike at the July meeting. The market does not expect back-to-back rate hikes.”

Next week. The focus will turn to the Bank of England (BoE) with markets expecting the central bank to hold rates at 3.75%.

Danske Bank commented; “We continue to see Governor Bailey's stance as the key to pin down the policy outlook. His remarks have been mostly dovish leaning as he has argued that allowing inflation to run above target is justified given the uncertainty about the impact of the Iran war on the economy and the weak pace of growth.

It did note the lack of consensus; “We could quickly be back in a situation with a completely split MPC with recent hawkish remarks not least from Meghan Greene, who is more worried about second round price effects than what the official BoE risk scenarios imply.”

Danske added; “We expect the Bank of England on hold, but hawkish voices are growing louder. Data releases ahead of the meeting could push more votes back in the hawkish camp but are not likely to change the hold decision.”

UK political uncertainty will also intensify ahead of the June 18th Makerfield by-election.

Rabobank head of FX strategy Jane Foley commented; "I think right now we're in a holding pattern because we haven't had an awful lot of political news from the UK in the last couple of weeks because obviously everybody's waiting for the by-election."

She does expect the political temperature will heat up and added; "I think sterling could be on the back foot because of political uncertainty.”

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TAGS: Pound Euro Forecasts