British Pound to Euro Forecast: Lower Energy Prices, Political Stability Lift GBP

Modified: Wednesday, 24 June 2026 14:56 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: Lower Energy Prices, Political Stability Lift GBP

The Pound to Euro exchange rate (GBP/EUR) surged to seven-week highs above 1.1600 as investors welcomed signs of a smooth political transition following Prime Minister Keir Starmer's resignation.

Hopes that Andy Burnham will move quickly to establish a credible economic team and maintain fiscal discipline helped ease market concerns, while lower energy prices provided an additional boost to Sterling.

GBP/EUR Forecasts: Bounces to New Highs

The Pound to Euro (GBP/EUR) exchange rate rallied strongly on Monday and briefly hit 7-week highs just above 1.16 before settling around 1.1590.

The Pound was boosted by hopes that there would be a quick and smooth transition to Burnham being installed as Prime Minister. There were also hopes for a credible choice as Chancellor which eased immediate fiscal-policy fears. Lower energy prices also increased hopes for a rebound in the economy.

Even with the possibility of near-term gains, ING is still backing GBP/EUR losses towards 1.15.

Economic policy under a Burnham administration will inevitably be a key element. The 10-year yield edged lower to 4.78% on Tuesday which helped underpin the currency.

ING noted the importance of the appointment of a Chancellor in a Burnham administration.

The bank added; “Sterling could see a further modest lift if Streeting is confirmed as chancellor, but risks from here look skewed to the downside. Markets appear optimistic about the transition, yet history shows that even limited budget concerns can trigger disproportionate moves in gilts and GBP.”

As far as economic data is concerned,the CBI industrial trends index dipped further to -45 for June from -41 previously and below expectations of -33.

CBI Senior Economist Cameron Martin commented; “Manufacturers are facing an increasingly difficult trading environment, with order books now at their weakest since 2020 and output continuing to fall.”

The UK manufacturing PMI index retreated to a 3-month low of 53.1 for June from 53.9 previously while the services-sector index also edged lower to a 41-month low of 48.7 from 49.3 and below expectations of 50.1.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented; “A disappointing June ‘flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole.

Lower energy prices would hope, but he added; “closer to home we are seeing signs of the unstable political environment unsettling business confidence and delaying spending, which will also need to calm in order to lay better foundations for economic growth to revive.”

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TAGS: Pound Euro Forecasts