Pound-to-Euro Week Ahead Forecast: Chancellor Choice Could Drive GBP

Modified: Monday, 13 July 2026 07:31 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: Chancellor Choice Could Drive GBP

The Pound to Euro exchange rate (GBP/EUR) has climbed to fresh 12-month highs above 1.1740 as Sterling continues to benefit from strong yield support, subdued market volatility and the unwinding of long-held bearish positions.

With Andy Burnham expected to be confirmed as Prime Minister later this month, investors are increasingly turning their attention from the leadership transition itself to the composition of the new Cabinet and the direction of UK fiscal policy.

GBP/EUR Forecasts: Waiting for Burnham

JP Morgan has upgraded its Pound to Euro (GBP/EUR) exchange rate forecasts and, despite a retreat to 1.1360 late in the third quarter, it expects a rebound to 1.1630 on a 1-year view.

Rabobank expects a retreat to 1.15 within the next few months.

GBP/EUR continued to strengthen during the week and posted 12-month highs just above 1.1740.

There was further notable evidence of a covering of short positions while the Pound also drew support from high yields as global volatility remained relatively contained.

There were also increased expectations that the Bank of England (BoE) would raise interest rates at least once before year-end.

Political developments will be watched closely, although the impact will be limited by the Summer holidays. Andy Burnham is set to be confirmed as the new Prime Minister on July 20th

Rabobank’s chief FX strategist Jane Foley considers a coronation could have benefits; “the popularity of Burnham within Labour may also be a good omen given the deep party factions which Starmer was unable to effectively control."

Labour is still trailing in opinion polls and she added; "Nor does it step around the fact that the tightness of UK public finances suggests that the agenda for Burnham will be very tight. The UK tax burden has already reached a post war high, and Chancellor Reeves’ increases to companies’ national insurance contributions and minimum wages have been widely cited by businesses as a factor behind weaker UK employment."

The immediate focus will be on Cabinet appointments, notably the post of Chancellor. According to Rabobank; "Who is going to be Chancellor is going to give signals to the market as to whether or not we are going to see a chancellor that will try and tighten those purse strings or not. And I think that could really set the tone for sterling through the summer and into the autumn."

JP Morgan commented on the Pound; “Forecasts upgraded slightly for 2026 to reflect Burnham's reassuring communication around fiscal rules and scope for intra-quarter EUR/GBP downside given solid G10 carry and resilient growth.

It did note; “As we get closer to the September Labour Party conference, the market could start to bake risk premium back in.

The ECB outlook will continue to be watched closely, especially as oil prices moved higher during the week. At this stage, markets expect a second rate hike in September which could provide some Euro protection.

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TAGS: Pound Euro Forecasts