British Pound to Euro Forecast: French Debt Fears Push GBP/EUR Above 1.18

Modified: Tuesday, 6 October 2026 17:16 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: French Debt Fears Push GBP/EUR Above 1.18

The Pound to Euro exchange rate (GBP/EUR) has surged to 11-week highs above 1.1800 as escalating concerns over France's fiscal and political outlook continue to undermine the Euro.

Pound Sterling has its own significant risks ahead of the October Budget, but investors currently view the French situation as the more immediate threat, allowing the Pound to move within striking distance of 16-month highs.

GBP/EUR Forecasts: 11-Week Highs

After strong gains last week, the Pound has secured further gains on Monday with the Pound to Euro (GBP/EUR) exchange rate hitting 11-week highs just above 1.18. It also put the cross within touching distance of 16-month highs.

There are still reservations over the Pound, but Euro vulnerability remains the key element amid on-going fears surrounding the French situation.

In this context, Rabobank has raised the 3-month GBP/EUR forecast to 1.1765 from 1.15 previously.

According to Rabobank; “We would stress that Europe’s circumstances are currently very different from either of these crises and we would be cautious of drawing comparisons. That said, France’s political and fiscal issues are arguably in a more difficult position currently than those of the UK."

It added; “Chancellor Healey faces a difficult task on October 28 but the situation on the other side of the Channel suggests that GBP is less vulnerable to a sell off vs. the EUR than it would be otherwise."

Fears surrounding the French situation have intensified, especially with major protests across schools. There have also been notable political protests in Spain with Prime Minister Sanchez calling a snap general election.

ING commented; “All eyes will remain on French debt this week. Whether last week's sell-off prompts a more fiscally supportive stance from either the right or left in French politics remains to be seen, but for the time being it looks like investors will steer clear of French debt.
MUFG commented; “The yield spread over German Bunds has blown to just over 140bps which is almost 60bps wider than before the summer. The increasingly rapid sell-off is adding to the sense of crisis in the French government bond market.

ING added; “And presumably there will be intense focus on whether last week's French budget submission makes any progress in a deeply divided parliament.”

MUFG added; “On the plus side, National Rally leader Marine Le Pen has indicated that she may refrain from trying to topple the government and back their budget plans. Le Pen has already indicated last week that she would be willing to support a less than perfect budget in order to avoid a bond market crisis.”

Regional developments will also be potentially pivotal. According to MUFG; “It was notable at the end of last week that Italian government bonds were also negatively impacted even at the short-end of the curve. The 2-year yield spread between Italian and German government bonds has widened by around 20bps.”

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TAGS: Pound Euro Forecasts