British Pound-to-Euro Forecast: Can GBP Extend Its Break Above 1.1620?

Modified: Thursday, 2 July 2026 13:56 BST - Written by Frank Davies

STORY LINK British Pound-to-Euro Forecast: Can GBP Extend Its Break Above 1.1620?

The Pound to Euro exchange rate (GBP/EUR) has climbed to a fresh 10-month high above 1.1620 as investors continue to scale back concerns over the UK's political transition.

Andy Burnham's commitment to maintaining fiscal discipline has helped calm gilt markets, while softer Eurozone inflation and a weaker economic outlook have continued to weigh on the Euro, leaving Sterling in its strongest position against the single currency since last summer.

GBP/EUR Forecasts: Fresh Yearly Highs

The Pound to Euro (GBP/EUR) exchange rate has continued to edge higher and is trading just above 1.1620 at a fresh 10-month high.

A break above this level could fuel additional near-term gains on short covering.

The release of the Defence Investment Plan on Tuesday reinforced concerns that Burnham will have tough choices to make if he is confirmed as Prime Minister. Markets are still calm at this stage, however, and the Euro continues to struggle in global markets which is providing net GBP/EUR support.

Rabobank commented; “the fact that PM Starmer has stepped down and that Burnham may be able to take the reins without a messy leadership election has removed some of the uncertainty that had been feared just a couple of weeks ago. For now, Burnham’s reassurances that he will stick to Chancellor Reeves’ fiscal rules has kept the gilt market calm."

The bank still expects gradual GBP/EUR losses to 1.15 during the third quarter.

The final reading for the June UK manufacturing index was revised lower to 52.5 from the flash reading of 53.1.

Output increased at the fastest rate since September 2024, but confidence remained fragile. Rob Dobson, Director at S&P Global Market Intelligence commented; “Sustaining the upturn is becoming a bigger concern. Manufacturers are currently benefiting from client strategic stockpiling, as they safeguard against supply chain disruptions and expected price rises. A drop in the rate of growth of new work intakes suggests this boost is already starting to fade.”

Nationwide reported that house prices were unchanged in June after a 0.6% decline the previous month with the annual increase at 2.2% from 1.7% previously.

Chief Economist Robert Gardner commented; “It is not surprising that the market has softened a little in recent months, given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates.

He did express some optimism; “If the energy shock continues to subside, the Bank of England may not need to raise interest rates, or at least by less than had previously been anticipated - a view reinforced by the fact that UK inflation has also been lower than expected in recent months.”

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TAGS: Pound Euro Forecasts