British Pound to Euro Forecast: EUR Shrugs Off AfD Victory, ECB Ahead

Modified: Tuesday, 8 September 2026 17:31 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: EUR Shrugs Off AfD Victory, ECB Ahead

The Pound to Euro exchange rate (GBP/EUR) has remained below the important 1.1650 level as the Euro shrugged off renewed German political uncertainty.

The AfD's strong regional election result has raised questions over the stability of Chancellor Merz's government, but resilient Eurozone growth and expectations of another ECB rate hike this week have so far prevented a significant Euro sell-off.

GBP/EUR Forecasts: Unable to Regain Key Level

The Euro has proved resilient with near-term growth hopes and expectations of an ECB rate hike offsetting unease surrounding German political developments as the AfD wins the Saxony local elections.

The Pound to Euro (GBP/EUR) exchange rate is trading just below 1.1640 and unable to regain the 1.1650 level.

The speech from Chancellor Healey, which reiterated the promise of fiscal discipline, had little immediate Pound impact with the 10-year bond yield trading around 5.08%.

ING expects further GBP/EUR resistance close to 1.1650 with potential short-term support around 1.1615.

The right-wing AfD party won the Saxony Anholt state election with around 44% of the vote compared with around 17% for the CDU.

ING commented; “While not a major negative for the euro, Sunday's election results in Saxony-Anhalt will serve as a reminder of the declining popularity of Chancellor Merz's CDU party, and, if backed up by similar results in two further regional elections, raise tensions within the governing coalition.

It added; “So far, the German government's infrastructure and defence spending plans seem to be paying dividends for German growth prospects and international investors will not want to see those interrupted.”

Rabobank expressed considerable concerns surrounding the underlying environment; “The “sensible centre” doesn’t seem to have any answers to those huge problems regardless of whether one likes the AfD and BSW proposals. As such, could markets start considering a second German structural shift in the space of a few years? First, ‘Germany will never borrow’ became ‘Germany is borrowing hugely’; could ‘Germany is politically stable’ now become ‘Germany is politically unstable’.”

As far as monetary policy is concerned, the ECB will announce its latest policy decision on Thursday ahead of the Bank of England decision next week.

MUFG commented; “The ECB is widely expected to deliver a second 25bp rate hike in response to the energy price shock. We expect policymakers to express greater concern about recent developments in the Middle East, which have pushed European natural gas prices to their highest levels since the start of the US-Iran conflict.”

It added; “We expect the ECB’s updated guidance to leave the door open to additional rate hikes, while stopping short of signaling a strong commitment to another move.”

According to Rabobank; “We maintain that policymakers will probably hold rates at 2.50% for an extended period, but risks are skewed to further hikes. Those hikes will only materialise if price pressures spreads beyond energy inflation and the economy remains resilient.”

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