British Pound to Euro Forecast: GBP Hits One-Year Best Exchange Rate vs EUR

Modified: Wednesday, 1 July 2026 14:16 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Hits One-Year Best Exchange Rate vs EUR

The Pound to Euro exchange rate (GBP/EUR) has climbed to a one-year high above 1.1620 after softer-than-expected Eurozone inflation reinforced expectations that the European Central Bank will be able to slow the pace of policy tightening.

June inflation eased from 3.2% to 2.8%, suggesting the worst-case inflation scenario has been avoided for now as lower energy prices and sluggish economic activity reduce immediate price pressures.

GBP/EUR Forecasts: Attacking Resistance Above 1.16

The Pound has held firm against a fragile Euro with the Pound to Euro (GBP/EUR) exchange rate testing resistance above 1.1600.

UBS sees scope for gains to 1.1765 by the end of the year.

Weaker than expected UK data failed to undermine the Pound with traders seeing scope for a covering of short Pound positions amid an easing of immediate fears over medium-term fiscal policy.

UK mortgage approvals dipped to 56,200 for May from 66,000 the previous month, well below consensus forecasts of 63,000 and the lowest reading since December 2023.

Simon Gammon, a managing partner at mortgage brokers Knight Frank Finance commented; "The property market remained fairly resilient through March and April, with mortgage lending running in line with long-run averages, but May's data provided the first signs that a larger number of borrowers were beginning to sit on their hands."

UK yields have continued to move lower with the 10-year yield close to 2-month lows near 4.70%. There will be hopes that an easing of yields will trigger fresh demand in the housing sector.

Other data recorded a net outflow of overseas funds from UK bonds, the first negative reading since August 2025.

Scotiabank commented; “Trends here will warrant attention, however, as markets assess prospects for the Burnham years ahead.”

Euro-Zone developments will also be watched closely. MUFG commented; “The euro has come under selling pressure in recent months as evidence has been building over the negative impact from the energy price shock on European economies. Economic data surprises from the euro have been surprising on the downside on balance since April although the worst point for negative data surprises has now passed in late May.”

MUFG did see some scope for a medium-term revival; “Softer growth in Europe in Q2 remains a headwind for euro performance in the near-term although if energy prices stabilize at lower levels going it will help to encourage a pick-up in cyclical momentum later this year providing more support for the euro.”

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TAGS: Pound Euro Forecasts