British Pound to Euro Forecast: Strong UK GDP Keeps GBP Near 16-Month High

Modified: Thursday, 15 October 2026 12:31 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: Strong UK GDP Keeps GBP Near 16-Month High

The Pound to Euro exchange rate (GBP/EUR) held close to 16-month highs around 1.1820 after stronger-than-expected UK GDP data provided Sterling with fresh support.

The economy expanded by 0.1% in August against forecasts for a contraction, while persistent French fiscal concerns continued to undermine the Euro, leaving the Pound within reach of key resistance at 1.1850.

GBP/EUR Forecasts: Pound Sterling Holds Near 16-Month Highs

The Pound to Euro (GBP/EUR) exchange rate remained close to 16-month highs on Thursday, trading around 1.1820 after encountering resistance in the 1.1840-1.1850 area.

If 1.1850 breaks decisively, the next important resistance level would be around 1.1900.

Sterling received fresh support from stronger-than-expected UK growth data, while continued concerns surrounding France and relatively fragile Euro sentiment limited demand for the single currency.

UK GDP increased by 0.1% in August compared with consensus forecasts for a 0.1% contraction.

Annual growth accelerated to 2.1%, the strongest rate since 2022, while manufacturing output increased 1.2% on the month.

Computer programming provided a particularly strong contribution, increasing 1.1% in August and around 13% so far this year.

The figures provided some relief ahead of the October 28 Budget and reinforced expectations that the Bank of England will raise interest rates in November.

A fresh poll of economists found a clear expectation that Bank Rate will increase to 4.0% next month, although there remains substantial disagreement over whether further hikes will follow.

Market conditions have also become somewhat calmer following the recent spike in global bond yields.

UK gilt yields have eased from their recent highs, while Chancellor John Healey reiterated the government's commitment to fiscal discipline ahead of the Budget.

There will be relief if fiscal rules are maintained, although tax increases would still have important economic and political implications.

Energy prices will remain another key influence on both the UK and Euro-Zone outlook.

Although prices have eased from their recent peaks, UK and European natural gas prices remain elevated and continue to pose risks to inflation, growth and central-bank policy.

MUFG commented; "G10 FX volatility is starting to turn lower again after the recent spike higher as the US dollar strengthened in response to the surge in sovereign bond yields. There has been a similar modest retracement in bond market volatility as well and if bond yields have settled around a new equilibrium then we could see volatility come down further in both rates and FX."

The bank remains cautious over the broader outlook; "However, the risks appear greater to us that we could still have further to go in this current spike in yields. The general consensus on the Middle East is that energy prices are unlikely to retrace and that the current status is likely to continue. But the risks now seem more skewed to a worsening of the crisis."

There are also continuing reservations surrounding the Euro, with French fiscal and bond-market risks remaining a major focus.

ING commented; "The euro is not really recovering momentum in other crosses, a sign that French risk continues to weigh. The France-Germany 10yr yield spread tightened around 5bp yesterday to 137bp, seemingly driven by relief in the global bond market rather than idiosyncratic factors."

The latest French inflation figures have added another complication, with harmonised inflation accelerating to 3.4% in September from 2.6%, its highest rate since early 2024.

For GBP/EUR, 1.1850 remains the immediate upside barrier.

A sustained break would increase the prospect of a move towards 1.1900, while 1.1780-1.1800 should provide initial support if Sterling retreats.

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TAGS: Pound Euro Forecasts