Pound-to-Euro Week Ahead Forecast: Autumn Budget Now Key for GBP

Modified: Monday, 29 June 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: Autumn Budget Now Key for GBP

The Pound to Euro exchange rate (GBP/EUR) has eased back from recent 10-month highs as investors assess the implications of the UK's changing political landscape and fading expectations for further Bank of England interest-rate increases.

While Sterling has remained relatively resilient following Prime Minister Keir Starmer's resignation, attention is now shifting towards the economic priorities of a potential Andy Burnham administration and whether fiscal discipline will be maintained.

GBP/EUR Forecasts: All set for Burnham

MUFG still expects that the Pound to Euro (GBP/EUR) exchange rate will retreat towards 1.1360 over the next few months amid weaker yields.

UBS, however, expects gains to 1.1765 by the end of the year with political concerns overblown.

GBP/EUR held firm during much of the week, but failed to hold 10-month highs around 1.1620 and retreated to 1.1570.

Political developments will be watched very closely following the resignation of Prime Minister Starmer. There are very strong expectations that Burnham will win any leadership contest and may avoid a formal challenge.

Assuming he becomes Prime Minister, fiscal policy will be a key element. There are strong hints that Burnham will not keep Chancellor Reeves in post with notable speculation over a successor and potential policy changes.

According to Sarah Coles, head of personal finance at AJ Bell; “The question is whether the next dynamic duo will adopt a similar approach to Starmer and Reeves, or head down another route entirely."

Andrew Goodwin, chief UK economist at Oxford Economics also noted difficult choices; “Anywhere he wants to spend more, he’s going to have to either cut spending elsewhere to finance it, or he’s going to have to increase taxes. This isn’t a time where you can come in and pursue really big picture ideas.”

MUFG notes that Burnham will be under pressure to respect fiscal rules and avoid stresses in the bond market.

It did, however, add; “if Burnham proves overly cautious and avoids implementing more substantial policy changes, he may struggle to reverse the Labour Party’s declining public support.” It noted the importance of the Autumn Budget.

UBS is more positive over the outlook; “GBP continues to show resilience in the face of political developments at home given the ongoing commitment to fiscal rules and a benign fundamental flow backdrop.”

Bank of England policy will also be a key element for the Pound.

MUFG commented; “UK rate market participants are now less confident that the BoE will deliver multiple rate hikes and have pushed back the expected timing of a hike to later this year, likely in September or November.”

The bank has dropped its call for rate hikes this year, undermining the Pound’s yield support

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TAGS: Pound Euro Forecasts