British Pound to Euro Forecast: GBP Slips Below 1.20 as Oil Prices Ease

Modified: Tuesday, 3 November 2026 17:16 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: GBP Slips Below 1.20 as Oil Prices Ease

The Pound to Euro exchange rate (GBP/EUR) retreated from 17-month highs above 1.2000 to around 1.1960 as lower oil prices provided some relief for the Euro and investors took profits following Sterling's recent rally.

The Pound remains supported by expectations of a Bank of England rate hike this week, although analysts warn that stretched positioning could leave GBP/EUR vulnerable to further consolidation.

GBP/EUR Forecasts: Failing to Hold 1.20

The Pound to Euro (GBP/EUR) exchange rate was unable to hold 17-month highs just above the 1.2000 level on Monday and retreated to near 1.1960 on Monday.

There was some Euro relief from a dip in oil prices while the Pound was also vulnerable to a limited correction after a run of strong gains.

ING commented; “Some consolidation is probably due. But with high energy prices likely to keep expectations of higher UK policy rates in place until early next year and French budgetary problems unresolved, it is too early to expect a significant low in EUR/GBP. (Peak for GBP/EUR)

Credit Agricole is less confident in the near-term Pound outlook; “the outcome of next week’s BoE
meeting could leave the GBP vulnerable to profit-taking on stretched market longs
especially vs the EUR.”

The final UK manufacturing PMI index reading was confirmed at 52.8. Business optimism hit an 8-month high, while output costs increased at the fastest rate for three months.

Rob Dobson, Director at S&P Global Market Intelligence commented; “UK manufacturing showed resilience in the lead up to the Autumn Budget. Rates of growth in output and new orders both gathered pace in October, as companies responded to signs of improving demand in both domestic and overseas markets.”

There are strong expectations that the Bank of England (BoE) will raise interest rates this week with a 25 basis-point hike to 4.00%.

ING still sees short-term fundamental support for the Pound; “Upside economic surprises, UK fiscal policy seemingly heading in the right direction and warmer ties with the EU all seem to be helping sterling too. Notably, speculators are still running reasonably large short positions in sterling, which suggests this period of sterling outperformance can continue.”

The Euro-Zone PMI manufacturing index was revised up to 52.7 from the flash reading of 52.4, although this was still a 2-month low for the index.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence was confident in the outlook: “Another solid PMI reading extends the eurozone’s best growth spell for manufacturing for over four years.”

There are still important concerns surrounding French debt.

MUFG commented; “French government bonds will not have been helped by the ratings announcement from Fitch late on Friday. Fitch announced that they have lowered the outlook for France’s credit rating to negative while leaving the credit rating unchanged at A+.”

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TAGS: Pound Euro Forecasts