British Pound to Euro Forecast: UK Growth, EU Brexit Reset Hopes Lift GBP

Modified: Thursday, 1 October 2026 09:46 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: UK Growth, EU Brexit Reset Hopes Lift GBP

The Pound to Euro exchange rate (GBP/EUR) climbed to a one-month high around 1.1700 after Sterling received a double boost from stronger UK growth and Prime Minister Andy Burnham's push for a fundamentally closer relationship with the European Union.

Upgraded GDP figures reinforced confidence in the economy, while the prospect of lower long-term UK-EU trade barriers added a potentially important structural positive for the Pound.

GBP/EUR Forecasts: One-Month High

The Pound secured net gains on Wednesday following a double boost from stronger UK growth data and Prime Minister Andy Burnham's push for a much closer long-term relationship with Europe.

The Pound to Euro (GBP/EUR) exchange rate tested one-month highs, with fragile Euro sentiment also contributing to the move.

High UK yields continued to provide underlying Sterling support, although concerns remain over fiscal policy and the impact of elevated borrowing costs on government debt-interest payments.

The final estimate for second-quarter GDP was revised higher to 0.5% from the previous estimate of 0.4%.

The Office for National Statistics also confirmed that the UK recorded the strongest growth among G7 economies during the first half of 2026.

Business investment was revised sharply higher, while household disposable income also improved and the current-account deficit narrowed.

XTB research director Kathleen Brooks commented; “This is fairly typical of the UK economy, which is service based, the real surprise was the strength of business investment and an improvement in the trade figures, which showed a boost in exports.”

RSM UK chief economist Thomas Pugh also highlighted the strong first-half performance, but remained cautious over the outlook; “However, the next six months looks tougher with potential interest rate rises, a sharp increase in inflation and another tax raising budget all to come. That will drag heavily on growth over the winter.”

Burnham Opens Door to Closer EU Relationship

Prime Minister Andy Burnham also provided Sterling with support following his speech to the Labour Party conference.

Burnham confirmed plans to reform the state pension triple lock if Labour wins the next election, removing the direct earnings link while retaining protection through inflation or a 2.5% minimum increase.

He also reiterated his commitment to fiscal stability and said the wider programme of reforms would be fully funded rather than financed through additional borrowing.

The more important currency-market development was Burnham's stance on Europe.

He stated that Brexit had done more harm than good to the UK economy and pledged to set out options for a fundamentally closer relationship with the European Union.

MUFG noted; “He outlined three options he would discuss at the UK-EU summit scheduled for later this year: i) rejoining the EU, ii) rejoining the single market and iii) entering a customs union.”

Burnham has subsequently confirmed that full EU membership remains one of the options under consideration, alongside the single market and customs union.

MUFG added; “It opens up the possibility for a potential reverse-Brexit trade for the pound in the future.”

The prospect of reduced trade barriers and improved access to the UK's largest export market would potentially provide structural support for Sterling if markets begin to see a meaningful change in the UK's long-term relationship with Europe.

Budget Remains Major Pound Risk

MUFG also noted that Burnham's wider policy programme has revived speculation over the political timetable.

It added; “Plans for significant policy changes have also refuelled speculation that he could seek to hold an early election. Market focus will now shift to the upcoming Budget on 28th October which is an important event risk for the pound heading into year-end.”

The October Budget remains the main domestic risk for Sterling.

Markets will want reassurance that Chancellor John Healey can fund the government's spending commitments while preserving credibility in the gilt market.

For GBP/EUR, the move above 1.1700 improves the near-term technical picture.

A sustained break higher would bring 1.1750-1.1800 back into focus, while the 1.1650 area should now provide initial support.

The stronger UK growth data and prospect of closer EU ties have improved sentiment towards Sterling, but fiscal policy and the response of the bond market remain crucial to whether the latest gains can be sustained.

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TAGS: Pound Euro Forecasts