British Pound to Euro Forecast: Stronger UK Data Supports GBP Near 1.17

Modified: Wednesday, 2 September 2026 11:16 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: Stronger UK Data Supports GBP Near 1.17

The Pound to Euro exchange rate (GBP/EUR) has held firm above the important 1.1650 support area, advancing towards 1.1680 as relatively encouraging UK housing and manufacturing data supported Sterling.

The Euro has struggled to capitalise on higher inflation and expectations of an ECB rate hike, with elevated European energy prices continuing to cloud the regional outlook.

GBP/EUR Forecasts: Continuing to Hold Above 1.1650

The Pound to Euro (GBP/EUR) exchange rate has again found support above 1.1650 and secured a net advance to 1.1680 on Tuesday.

The Pound dipped on Monday amid month-end position adjustment, but recovered ground on Tuesday amid relatively favourable UK data, although there were significant losses for the FTSE 100 index.

Key short-term GBP/EUR support remains around 1.1650 with a break below needed to validate investment banks forecasting Pound losses towards 1.15.

Economic data will remain important with markets also focussing on political developments as parliament returns from recess.

Nationwide reported that house prices increased 0.2% for August after a 0.1% decline the previous month with an annual increase of 1.6% from 1.4% previously.

Nationwide's Chief Economist Robert Gardner commented; “Underlying affordability is improving, as house price growth remains well below earnings growth. This suggests that activity should regain momentum in the quarters ahead providing the energy shock wanes and confidence returns.”
The final August reading for the UK manufacturing index was revised to 51.7 from the flash estimate of 51.5 with business confidence at a 6-month high.

Rob Dobson, Director at S&P Global Market Intelligence commented; “The rate of expansion in the UK manufacturing sector cooled in August, with output and new order growth losing traction. There are still signs for continued optimism, however, as manufacturers reported a positive outlook for the year ahead.”

The headline Euro-Zone inflation rate increased to 3.3% for August from 2.9% the previous month and in line with consensus forecasts while the core rate edged lower to 2.4% from 2.5%.

The ECB will meet next week with strong expectations that the central bank will hike rates for the second time this year.

ING commented; “Despite little evidence of ongoing second round effects, the European Central Bank is almost guaranteed to hike rates again next week.”

There are still significant concerns surrounding underlying Euro-Zone fundamentals, especially with upward pressure on energy prices.

According to ING; “The ongoing re-escalation in the Middle East and Russia-related headlines are not helping the bullish euro case at the moment. European natural gas prices are at the March peaks, keeping the euro’s terms of trade under pressure. The positive impact on the euro of recent upward surprises in eurozone growth may run out of steam rapidly against such a commodity backdrop.”

There has, however, also been a further increase in UK natural gas prices to a fresh 3-year high which will trigger significant stresses in the UK economy.

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TAGS: Pound Euro Forecasts