Pound to Euro Week Ahead Forecast: GBP Under Pressure After BoE Pause, Makerfield Result

Modified: Monday, 22 June 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: GBP Under Pressure After BoE Pause, Makerfield Result

The Pound to Euro exchange rate (GBP/EUR) slipped to 20-day lows near 1.1520 after the Bank of England left interest rates unchanged and markets digested the political implications of Andy Burnham's victory in the Makerfield by-election.

While Sterling recovered modestly from its lows, investors remain cautious as expectations for future Bank of England tightening continue to fade and attention shifts towards the possibility of a Labour leadership challenge.

GBP/EUR Forecasts: BoE on Hold

Danske Bank continues to forecast Pound to Euro (GBP/EUR) exchange rate losses to 1.1240 on a 6-12-month view.

According to Danske; “A relatively weak UK growth outlook and our dovish stance on BoE compared to market pricing weighs on our GBP call.”

UBS, however, is backing gains to 1.1630.

According to UBS; “In our view, heavy short positioning and risk reversals indicating a market bias toward further downside have helped prevent Sterling from falling further and should - once the political noise fades - support a rebound in the Pound.”

GBP/EUR dipped to 20-day lows near 1.1520 before a slight recovery. The Bank of England (BoE) made no changes to interest rates while Andy Burnham won the Makerfield by-election, reinforcing expectations that there will be a challenge to Prime Minister Starmer.

Given the uncertainty, ING expects a short-term GBP/EUR move to 1.15.

The BoE held interest rates at 3.75%, in line with consensus forecasts. There was a 7-2 vote for the decision with Pill and Greene voting for a 25 basis-point hike to 4.00%.

The latest inflation data was slightly weaker than expected with the year-on-year rate holding at 2.8% compared with consensus forecasts of an increase to 3.0% with the core rate at 2.7%.

According to Danske Bank; “The meeting today has not changed our view that the most likely outcome is an unchanged Bank Rate for the coming year. An uncomfortable period with elevated inflation also lies ahead due to increased energy price caps.”

ING added; “A Bank of England rate hike now looks unlikely barring a severe spike in energy prices in July, which isn’t our base case. We expect a prolonged pause and cuts to resume in 2027.”

Rabobank is also not backing a rate hike; “Our baseline is that Governor Bailey, alongside other centrists in the MPC, would only respond with further tightening if there is clear evidence that a prolonged period of elevated energy prices is generating such effects. Accordingly, we now expect Bank Rate to remain on hold through the remainder of the year.”

Political developments will continue to be watched very closely with a particular focus on the bond market. A sustained jump in yields on concerns over fiscal policy would risk a slide in Pound confidence

MUFG commented; “The gilt market is more comfortable with the idea of Burnham becoming leader after he indicated he would stick to the government's fiscal rules limiting ability to loosen fiscal policy. Nevertheless, political uncertainty could act as a headwind for gilts and the pound.”

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TAGS: Pound Euro Forecasts