British Pound-to-Euro Forecast: GBP Outperforms as EUR Struggles for Momentum

Modified: Wednesday, 8 July 2026 16:01 BST - Written by Frank Davies

STORY LINK British Pound-to-Euro Forecast: GBP Outperforms as EUR Struggles for Momentum

The Pound to Euro exchange rate (GBP/EUR) climbed to a fresh 12-month high near 1.1720 as Sterling continued to benefit from subdued market volatility, easing political uncertainty and lingering pressure on the Euro.

Investors remain increasingly comfortable with the UK's political transition, while expectations that the European Central Bank may proceed cautiously with further rate hikes have limited support for the single currency.

GBP/EUR Forecasts: Fresh 12-Month High

The Pound to Euro (GBP/EUR) exchange rate maintained a strong tone on Tuesday and posted a fresh 12-month high close to 1.1720 before a correction to near 1.1700.

The Euro rallied slightly after a French appeal court confirmed a guilty charge against National Rally’s Le Pen, although there is still the possibility that she could run in the 2027 Presidential election.

Overall volatility remained low on Tuesday which helped underpin the Pound.

The gilt market remained calm with the 10-year yield just above 4.80%, although there are still longer-term concerns over the fiscal stability.

Danske Bank forecasts GBP/EUR losses to 1.1240 on a 6-month view as Euro yields increase relative to UK rates.

In its latest financial stability report, the Bank of England stated that leverage has increased substantially in equity markets with Governor Bailey stating that the risk of a sharp correction in equity markets remains high.

Any retreat in equities would lessen potential Pound support.

As far as data is concerned, Halifax reported that house prices increased 0.2% for June after a 0.2% decline the previous month with annual growth of 0.6% from 0.5% previously.

Nominations for the Labour Party leadership will open this week with very strong expectations that Burnham will secure an uncontested win. Even if there is an actual contest, Burnham remains an overwhelming favourite to win with tax and spending plans watched very closely.

According to CIBC; “the avoidance of a contested ballot, which risked the trading of fiscal profligate spending promises, has been positively rewarded, namely 10-year borrowing rates have eased back to levels not witnessed since early March.”

It added; “Note that Burnham has burnished his fiscal credentials by signing up three key economic advisors, including former BoE Chief Economist Andy Haldane.”

April LaRusse, head of investment specialists at Insight Investments commented; "Sterling's surprising resilience amidst recent political turmoil reflects a simple reality – much of the bad news has already been priced in."

She added; "Investors have spent years positioning for UK underperformance, so as outcomes prove less negative than feared, and fundamentals begin to stabilise at the margin, the currency is finding support."

ECB policy will also be watched closely. According to Danske Bank a relatively hawkish stance is likely; “The September ECB meeting is priced as a close call, with markets seeing even odds of a hike versus a hold. Weighing the arguments, we think the case for a second 25bp hike slightly outweighs the case for unchanged rates.”

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TAGS: Pound Euro Forecasts