British Pound to Euro Forecast: GBP Resilient Despite Risk-Off Markets

Modified: Thursday, 9 July 2026 15:01 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Resilient Despite Risk-Off Markets

The Pound to Euro exchange rate (GBP/EUR) eased back after reaching a 12-month high near 1.1720, as renewed geopolitical tensions prompted investors to trim some recent Sterling gains. Despite the pullback, underlying demand for the Pound has remained firm, with investors continuing to unwind bearish positions while awaiting further clarity on the economic policies of an expected Andy Burnham government.

GBP/EUR Forecasts: Retreat from 12-Month Highs

After hitting 12-month highs close to 1.1720 on Tuesday, the Pound to Euro (GBP/EUR) exchange rate retreated to below 1.17, but there was underlying demand on dips with GBP/EUR trading just above this level with on-going evidence that short positions were being covered.

At this stage, global political developments had a more substantial market impact, but traders were still wary over domestic developments as the Burnham administration drew closer.

Jane Foley, head of FX strategy at Rabobank commented; "We still don't know an awful lot about the policies of Burnham, assuming that he is the next Prime Minister. And we certainly don't know who his cabinet picks are going to be."

Risk conditions were notably less favourable with equities losing ground. Sentiment was hurt by a fresh flare-up in Middle East tensions as the US attacked Iranian targets in response to Iran’s moves to launch missiles against shipping in the Gulf.

The UK FTSE 100 index posted a 1.5% decline while there was net support for defensive currencies and oil prices moved higher.

There was also significant selling in gilts with the 10-year bond yield rising to a 4-week high around 4.92%.

According to Wealth Club chief investment strategist Susannah Streeter; "You're likely to see downbeat sentiment spread. The surging oil prices have sparked worries again about persistent inflation, with the Middle East tinderbox reigniting again."

There will be potential monetary-policy implications.

She noted that markets had scaled back expectations of ECB rate hikes; “Markets had been paring expectations for another interest rate hike by the European Central Bank before the end of this year, and policymakers had flagged that growth and inflation risks were more balanced following the recent ceasefire.”

There has, however, been a reversal on WEdnesday with markets pricing in 38 basis points of tightening by year-end compared with 25 basis points the previous day.

Following the amended sentence Le Pen announced that she would be the Rassemblement National (RN) candidate in the presidential election and that Jordan Bardella would serve as her Prime Minister if she won.

At this stage, there is still a high degree of uncertainty over next year’s election.

ING commented; “For the moment, our baseline assumption is that – barring a surge in support for Mélenchon – any negative euro impact in coming months will likely prove short-lived as the RN and other parties closer to the centre will be careful not to cause serious OAT volatility during the campaign.”

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TAGS: Pound Euro Forecasts