British Pound to Euro Forecast: UK Growth, Mahmood Hopes Keep GBP Near Best

Modified: Thursday, 16 July 2026 17:36 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: UK Growth, Mahmood Hopes Keep GBP Near Best

The Pound to Euro exchange rate (GBP/EUR) held close to 12-month highs above 1.1700 after stronger UK economic data and growing confidence in the incoming Burnham administration boosted Sterling.

A modest rebound in UK GDP, combined with reports that Andy Burnham is set to appoint the fiscally cautious Shabana Mahmood as Chancellor, helped reassure investors that fiscal discipline will remain a priority.

GBP/EUR Forecasts: Pound Supported by Politics and BoE Expectations

The Pound to Euro (GBP/EUR) exchange rate continues to hold comfortably above the 1.17 level after breaking to fresh 12-month highs earlier this week.

Political developments have remained supportive for Sterling. Reports that Andy Burnham will appoint Shabana Mahmood rather than Ed Miliband as Chancellor have reassured investors concerned about fiscal discipline, helping to underpin the Pound.

The 10-year gilt yield remains close to 5.00% and bond markets will continue to be watched closely given underlying reservations surrounding fiscal dynamics.

Scotiabank commented; “BoE rate expectations are firming however, extending their recent recovery to price a cumulative 46bpts of tightening by December (a considerable repricing from the 17bpts priced last Monday, July 6th). Yield spreads are climbing and offering the GBP fundamental support, while measures of sentiment show signs of stabilization following their recent recovery.”

Thursday's GDP report showed the UK economy grew by 0.1% in May, matching consensus forecasts and reversing April's decline. While the monthly gain was modest, the three-month growth rate remained robust at 0.7%, supporting expectations that the Bank of England can maintain its cautious approach to monetary policy.

Attention will now shift to next week's labour market and inflation releases, which are expected to play a more important role in shaping expectations for the Bank of England's July policy meeting.

Aviva head of rates Ed Hutchings expects jobs data will prove a vital factor in the BoE's decision-making. He commented; “A weaker employment market could well give the MPC more pause for thought around potential hikes in the face of elevated inflation.”

Eurozone data has remained relatively subdued. Industrial production fell by 0.2% in May against expectations for a 0.3% increase, while investors continue to monitor the impact of elevated gas prices on the region's economic outlook.

According to ING; “Hopes for more geopolitical stability, lower energy prices and strong public investment seem to drive optimistic views for now. The latter seems more of a sure bet than the first two, with Middle East uncertainty back on the table.”

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TAGS: Pound Euro Forecasts