Pound-to-Euro Week Ahead Forecast: BoE Split Offers Limited GBP Support

Modified: Monday, 3 August 2026 06:01 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: BoE Split Offers Limited GBP Support

The Pound to Euro exchange rate (GBP/EUR) ended the week close to 1.1695, recovering from mid-week lows but recording a second successive weekly decline.

Sterling found support from three votes for an immediate Bank of England rate hike, although stronger Eurozone inflation and growing expectations of a September European Central Bank increase limited Pound buying.

GBP/EUR Forecasts: 1.16 support in focus

Rabobank expects the Euro to regain ground over the next three months, forecasting EUR/GBP at 0.87, which would imply a Pound to Euro rate close to 1.15.

According to Rabobank; “There is a risk of an upside bias in EUR/GBP towards 0.87 on a 3-month view.”

GBP/EUR settled at 1.1694 on Friday, around 0.2% lower over the week after trading below 1.1660 on Wednesday.

The pair still gained 0.7% during July, but retreated sharply from the 13-month high of 1.1827 recorded in the middle of the month.

Rabobank expects the Bank of England to leave rates unchanged through the end of 2026 and warned of “potential for disappointment over a lack of rate rises.”

The Bank of England voted 6–3 to hold Bank Rate at 3.75%, with Huw Pill, Megan Greene and Catherine Mann supporting an immediate increase to 4.00%.

The vote was more hawkish than expected, but the majority found “little evidence so far” of stronger second-round inflation effects and pointed to “clear signs of underlying disinflation.”

Pantheon Macroeconomics expects UK rates to remain unchanged for an extended period, although it sees a clear risk of one further increase.

According to Pantheon; “Our call is for rates to be left unchanged until end-2027, but risks are skewed to a hike in November.”

Pantheon estimates that the UK economy expanded 0.4% in the second quarter and considers underlying activity stronger than the Bank assumes.

It added that the swing voters appear “content to keep rates on hold”, leaving Sterling dependent on incoming data to revive expectations of a November move.

The Euro also has a stronger interest-rate backdrop after Eurozone inflation increased from 2.8% to 2.9% in July, led by a 10.0% annual increase in energy prices.

Eurozone GDP expanded 0.4% in the second quarter after stagnation during the first three months of the year.

Deutsche Bank expects the ECB deposit rate to increase from 2.25% to 2.50% in September.

The bank commented; “Despite the absence of formal guidance, a hike in September feels more or less a done deal.”

It added; “The ECB did not challenge what the market is currently pricing.”

Final UK business surveys will be the main domestic focus during the coming week after the flash composite PMI recovered from 49.3 to 52.1 in July.

Manufacturing increased to 52.8 and services recovered to 51.8, with confirmation of the stronger readings likely to offer the Pound some support.

Eurozone retail sales and German factory orders and industrial production will also be watched closely.

Firm Eurozone data would reinforce ECB hike expectations and put GBP/EUR support around 1.1650 under pressure, with a break exposing 1.1600 and Rabobank’s implied 1.15 target.

Stronger UK surveys or weak German data could instead allow the pair to recover above 1.1700, although gains are likely to remain difficult while markets expect the ECB to tighten policy in September.

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TAGS: Pound Euro Forecasts