Pound-to-Euro Forecast: for Week Ahead: GBP Resilient Now, But Losses Expected

Modified: Monday, 10 August 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: for Week Ahead: GBP Resilient Now, But Losses Expected

The Pound to Euro exchange rate (GBP/EUR) has remained relatively resilient around 1.1675, with subdued volatility and calmer gilt markets helping Sterling consolidate recent gains.

However, investment banks remain cautious over the medium-term outlook as fading Bank of England rate-hike expectations, weak UK growth and renewed fiscal pressures threaten to erode the Pound's current support.

GBP/EUR Forecasts: Underlying fundamentals in focus

MUFG forecasts that the Pound to Euro (GBP/EUR) exchange rate will retreat to 1.1360 by the second quarter of 2026.

Standard Chartered has a 3-month forecast of 1.1700, but expects a retreat to 1.13 on a 12-month view.

GBP/EUR was held in tight ranges during the week and traded around 1.1675 with no major UK developments. Overall volatility remained low with the 10-year bond yield holding below the 5.00% level, although there are significant underlying risks.

CIBC commented; “Given its high beta status Sterling’s performance remains somewhat beholden to risk sentiment. Moreover, the macro environment remains acutely exposed to energy price dynamics.”

Fiscal policy will be one key underlying element for the Pound.

MUFG commented; “PM Burnham still has a difficult task ahead in providing low-income earners with support. The headroom from the last budget has already declined by around GBP 10bn while defence spending is already committed to rise by GBP5bn so any question marks over fiscal credibility could certainly translate quickly into Gilt volatility and renewed pound underperformance.

Standard Chartered noted near-term support; “Fiscal risk premium has been largely priced out following UK Prime Minister Burnham's reassurances on fiscal rules and reassuring adviser appointments. This de-escalation is keeping the GBP resilient.

Nevertheless, it added; “We see upside capped by subdued growth, a slack labour market with falling payrolls and decelerating wages, easing underlying inflation and lingering autumn Budget fiscal risks.”

Rabobank notes underlying stresses; “Burnham’s approach has an economic logic as well as a political one. Yet its limits are equally clear. Good vibes can buy time and create space for reform, but they cannot resolve the structural weaknesses holding back the UK economy. The test is whether Burnham can convert some of the positive momentum into action before optimism fades.”

Bank of England (BoE) policies and yields will also be crucial for the Pound with investment banks sceptical that market pricing is justified.

According to MUFG; “We view the UK rates market as overpriced for what the BoE delivers – currently we see the BoE staying on hold but if they hike it will still be less than currently priced (slightly more than two).”

ING commented; “Policy differentials are a key driver here, where BoE tightening expectations should evaporate into year-end. In addition to slowing inflation driving the BoE view, so will UK GDP. This typically slows in the second half – potentially a problem with faulty seasonal adjustments.”

The bank added; “And unlike the fiscal stimulus coming through in continental Europe, UK fiscal policy will tighten in 2027 as frozen income tax brackets snare more earners. A slightly weaker pound is favoured.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts