Pound to Euro Week Ahead Forecast: Big Call for Bank of England

Modified: Monday, 14 September 2026 07:01 BST - Written by James Fuller

STORY LINK Pound to Euro Week Ahead Forecast: Big Call for Bank of England

The Pound to Euro exchange rate (GBP/EUR) has remained close to 1.1650 ahead of a pivotal Bank of England meeting, with Governor Andrew Bailey facing the difficult task of balancing elevated inflation risks against softer underlying economic pressures.

Markets are pricing an aggressive tightening cycle through 2027, leaving Sterling vulnerable if the BoE signals that investors have gone too far.

GBP/EUR Forecasts: Big Call for BoE’s Bailey

After initial resilience, ING forecasts that the Pound to Euro (GBP/EUR) exchange rate will slide to 1.11 by the end of next year as the Bank of England (BoE) fails to meet market expectations.

SEB expects GBP/EUR to hold steady over the remainder of 2026 with more moderate losses to 1.1360 by the end of next year.

GBP/EUR was held in tight ranges during the week despite notable moves in the bond market and traded around 1.1650. According to SEB With positioning now long GBP, the scope for further gains looks more limited.

The Bank of England (BoE) is expected to hold rates at 3.75% this week with a split vote, but are pricing in at least three rate hikes by mid 2027.

ING commented; “UK activity data typically slows down into year-end and, at the margin, will cement the majority position of the doves at the BoE. We still like EUR/GBP heading higher but are lowering the profile as high energy keeps tightening expectations embedded.”
SEB added; “An unwinding of the almost three BoE hikes priced by the market would put downside pressure on GBP. However, the BoE is expected to remain on hold until next summer, keeping UK rates among the highest in G10 and hence providing Sterling with a continued “carry shield”.

Fiscal policy will remain a key focus, both domestically and globally with potentially important implications for the Pound.
Berenberg adopted a relatively positive stance; “Whereas the US and France have no plan to reduce their fiscal deficits, left on autopilot UK policy would result in a drop in government borrowing from 4.2% of GDP in fiscal year 2025-26 to 2.6% of GDP in 2029-30.”

It did add; “The Bank of England has ample scope to offset the hit to aggregate demand by lowering interest rates to stimulate private sector growth.”

The ECB increased its main interest rates by 25 basis points at the latest council meeting with the deposit rate increased to 2.50%.

There was an upgrade to inflation forecasts while the bank noted that growth had been resilient.

ING commented on the outlook; “Going further would mean that the ECB sees restrictive monetary policy as necessary. But there is a big difference between an economy that has shown resilience, and an overheating economy that needs restrictive monetary policy.”

It added; “It's difficult to envisage the ECB being willing to risk a recession to tackle what is still a textbook supply-side shock. However, admittedly, the ECB has made policy mistakes before.”

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TAGS: Pound Euro Forecasts