Pound-to-Euro Forecast: GBP Outperforms as Bond Market Concerns Ease

Modified: Thursday, 25 June 2026 15:46 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: GBP Outperforms as Bond Market Concerns Ease

The Pound to Euro exchange rate (GBP/EUR) climbed to its highest level in 10 months above 1.1620 as investors grew more confident that the transition to an Andy Burnham government will be orderly and fiscally disciplined. Sterling also benefited from easing UK bond yields and lower energy prices, while the Euro struggled to gain traction despite improving business confidence in Germany.

GBP/EUR Forecasts: 10-Month Best

The Pound to Euro (GBP/EUR) exchange rate rallied further to a 10-month high just above 1.1620 in early Europe on Wednesday before drifting back to near 1.1600. Markets are hopeful that a swift transition to Prime Minister Burnham will ensure stability, although there are still risks.

SocGen considers that the near-term Pound outlook has improved, especially if it can hold above 1.1600.

For EUR/GBP it added; "The next objectives could be located at projections of 0.8565 and 0.8535/0.8520." (GBP/EUR gains to 1.1675 and 1.1735.

The Euro remained on the defensive in global markets, despite stronger business confidence, while the Pound secured net support.

There remain very strong expectations that Andy Burnham will succeed Starmer as Prime Minister in July. There is still uncertainty whether there will be a challenge to Burnham, but he remains the overwhelming favourite.

Monex Europe head of macro analysis Nick Rees commented; "The obstacles to a Burnham coronation are slowly being cleared, offering sterling support at the margin.”

The latest reports suggest that Burnham will replace Chancellor Reeves, but there are reduced concerns that he will adjust fiscal rules and opt for a looser policy.

The UK 10-year bond yield retreated to just below 4.70%, illustrating reduced market concerns. There is still an important element of uncertainty over the outlook.

Monex’s Rees did add; "That said, we are still in the honeymoon period as far as Burnham is concerned, and economic realities remain challenging."

According to Scotiabank; “In politics, the presumed/next expected PM Burnham is said to be seeking flexibility in the UK’s self-imposed fiscal rules and will be setting out his economic agenda in a speech next week.”

Oil prices have declined further, lessening the potential for a Bank of England rate hike.

Domestic yields have also been softening reflecting the recent moderation in inflation data as Tuesday’s unexpected contractionary print in the services PMI.”

As far as the Euro-Zone is concerned, the German IFO business confidence index edged higher to 85.6 for June from 85.0 previously and in line with market expectations. Companies were more confident over the current situation with a marginal improvement in expectations.

ING commented; “The second consecutive increase in the Ifo index suggests that optimism in German businesses is gradually returning.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts