Pound to Euro Forecast: Best Exchange Rate in 17 Months Ahead of UK Budget

Modified: Wednesday, 28 October 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Euro Forecast: Best Exchange Rate in 17 Months Ahead of UK Budget

The Pound Euro (GBP/EUR) exchange rate edged higher on Tuesday as continued concerns over France's political and fiscal outlook weighed on the single currency, although uncertainty ahead of the UK's Autumn Budget limited Sterling's gains.

At the time of writing, GBP/EUR was trading at €1.1947, just below last week's 17-month high of €1.1954.

The Euro (EUR) remained under pressure on Tuesday as political instability and mounting concerns over France's public finances continued to unsettle investors.

Weeks of protests, some of which have turned violent, have added to the difficulties facing the French government as it attempts to secure parliamentary support for its 2027 budget.

French government borrowing costs have also climbed to their highest levels in 24 years, reflecting growing doubts about the country's ability to bring its substantial deficit under control.

Political divisions in the National Assembly have complicated efforts to agree on spending reductions and tax measures, leaving investors uncertain about whether meaningful fiscal reforms can be delivered.

The prospect of further political deadlock has raised concerns that pressure on French government debt could spread to other Eurozone bond markets.

The Euro faced an additional headwind from a firmer US Dollar (USD), with the two currencies' typically negative correlation adding to the pressure on the single currency.

The Pound (GBP), meanwhile, struggled to attract significant demand as fresh evidence of financial difficulties among UK businesses added to concerns about the domestic economy.

A report from financial advisory group BTG revealed that the number of British businesses experiencing 'significant' financial distress reached a record high during the third quarter of 2026.

The findings suggested that elevated borrowing costs, persistent inflation and pressure on company finances continue to create difficulties across the UK economy.

The report arrived just a day before Chancellor John Healey's first Autumn Budget, adding to questions about how the government intends to support businesses while maintaining control of the public finances.

Healey faces competing demands to ease financial pressures on households and companies without unsettling bond investors or substantially increasing government borrowing.

With few details of the proposed measures confirmed, Sterling traders appeared reluctant to take significant positions ahead of Wednesday's announcement.

As a result, the Pound's advance against the Euro remained modest despite continued weakness in the single currency.

Near-Term GBP/EUR Forecast: Autumn Budget Could Test €1.1950 Resistance

Wednesday's Autumn Budget is likely to provide the next major catalyst for the Pound to Euro exchange rate.

Chancellor John Healey is expected to outline measures aimed at supporting economic growth and easing financial pressures on households and businesses, while attempting to maintain confidence in the government's fiscal commitments.

The reaction of UK government bond markets will be particularly important.

A Budget that reassures investors about the sustainability of public borrowing could provide Sterling with fresh support, potentially allowing GBP/EUR to challenge last week's 17-month high near €1.1954.

A sustained move above this area would bring the psychologically important €1.2000 level into focus.

However, proposals that increase concerns about government borrowing or fail to address the UK's economic challenges could trigger renewed selling pressure.

A sharp rise in gilt yields would be particularly concerning, potentially pushing GBP/EUR back towards €1.1900.

For the Euro, Germany's latest consumer confidence figures could provide an additional influence on Wednesday.

Economists expect household sentiment to have deteriorated, and a weaker-than-forecast reading could add to concerns about the outlook for consumer spending in the Eurozone's largest economy.

Nevertheless, Euro investors may remain cautious ahead of Thursday's European Central Bank (ECB) interest rate decision and Friday's preliminary Eurozone GDP figures.

With the UK Budget approaching and France's fiscal problems unresolved, GBP/EUR could experience significant volatility as markets reassess the outlook for both currencies.

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TAGS: Pound Euro Forecasts