Pound-to-Euro Flat as BoE Rate Hike Expectations Fade

Modified: Thursday, 27 August 2026 20:31 BST - Written by James Fuller

STORY LINK Pound-to-Euro Flat as BoE Rate Hike Expectations Fade

The Pound to Euro (GBP/EUR) exchange rate traded within a narrow range on Thursday as investors assessed the latest meeting minutes from the European Central Bank (ECB).

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1664, little changed from Thursday’s opening levels.

The Euro (EUR) struggled to establish a clear direction on Thursday after the latest ECB minutes largely confirmed what markets had already anticipated.

Policymakers indicated that another interest rate increase was likely to be required to ensure inflation returns sustainably to the bank's 2% target.

The minutes suggested further tightening could be appropriate unless there is a meaningful improvement in the inflation outlook.

However, the broadly expected tone of the account did little to shift investor positioning, with markets already pricing in a 25-basis-point increase at the ECB's September meeting.

The Pound (GBP) also lacked momentum on Thursday as the absence of significant UK economic releases left Sterling without a fresh catalyst.

The quieter session followed a busy run of domestic data, including July's inflation figures, which showed CPI climbing to 2.9%, alongside labour market figures pointing towards a gradual loss of momentum in employment.

The contrasting signals have made the outlook for Bank of England (BoE) policy increasingly uncertain, while expectations of another interest rate increase before the end of 2026 have continued to fade.

Near-Term GBP/EUR Forecast: Eurozone Sentiment Data in Focus

Looking ahead to Friday, the Pound to Euro exchange rate could be influenced by the release of the Eurozone's latest economic sentiment figures.

An improvement in business and consumer confidence during August could provide a lift for the single currency, particularly if the data points to a strengthening economic outlook across the bloc.

However, gains for the Euro may be constrained by Germany's latest employment figures, which are expected to highlight continued weakness in the labour market of the Eurozone's largest economy.

With no major UK indicators scheduled, Sterling is likely to remain sensitive to broader market sentiment and developments across the currency market.

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TAGS: Pound Euro Forecasts