British Pound to Euro Forecast: High UK Yields Keep GBP Supported

Modified: Tuesday, 11 August 2026 08:01 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: High UK Yields Keep GBP Supported

The Pound to Euro exchange rate (GBP/EUR) has edged higher towards 1.1690, with calm global markets allowing Sterling to continue benefiting from the UK's relatively attractive yields.

The 10-year gilt yield remains close to 5.00%, helping offset lingering concerns over fiscal policy and expectations that the Bank of England will ultimately disappoint current market pricing for rate hikes.

GBP/EUR Forecasts: Pound Edges Higher

The Pound to Euro (GBP/EUR) exchange rate has maintained a solid tone after finding support close to 1.1650 and is trading around 1.1685 on Monday. Overall market conditions remain calm which helped underpin the Pound in global markets.

MUFG has closed its short GBP/EUR recommendation, but is still looking to re-establish short positions at more attractive levels. The bank has a year-end GBP/EUR forecast of 1.15.

Rabobank also expects a GBP/EUR retreat to 1.15 on a 3-month view.

The UK 10-year yield edged higher to 4.94% on Monday. MUFG commented; “The UK's 10-year real yield remains attractive, and the resilience of the pound suggests that investors continue to view this yield advantage as sufficient compensation for the political and fiscal risks facing the UK.”

The latest GDP data is due on Thursday with consensus forecasts of a 0.1% decline for June after a 0.1% increase the previous month.

For the second quarter, markets expect GDP growth of 0.4% after a 0.6% first-quarter gain.

MUFG is still wary over the medium-term outlook; “As we highlighted previously, options market pricing appeared overly optimistic and insufficiently positioned for the risk of a reversal in sterling. In particular, the market seemed to be underestimating the potential for the pound to weaken in response to rising fiscal concerns and a more volatile financial market environment.”

The bank added; “we expect fiscal concerns to become a more prominent market theme as the autumn approaches.”

ING also expects medium-term losses; "Our view on the pound is still bearish leaning on the back of our call for no rate hikes and markets still pricing in some tightening.”

Rabobank expects GBP/EUR will lose ground over the next few months. According to the bank; “RaboResearch continues to forecast no change in BoE rates through to the remainder of the year. The market, however, is currently priced for around 38 bps of tightening on a 6-month view.”

It added; “Given the potential for re-pricing BoE rate rises this year, coupled with the potential for political friction over budget cuts, we see risk of an upside bias in EUR/GBP.”

As far as the Euro-Zone is concerned, the Sentix investor confidence index improved to a 6-month high of 0.9 for August from -3.1 in July and above expectations of -0.7.

According to Sentix; “The assessment of the current situation, in particular, rose sharply, whilst expectations rose only slightly to +10.3 points. Germany, too, is showing further progress. Economic expectations have risen to their highest level since February 2026.”

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TAGS: Pound Euro Forecasts