British Pound to Euro Forecast: GBP Eyes 1.20 Ahead of BoE Rate Hike

Modified: Wednesday, 4 November 2026 12:01 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: GBP Eyes 1.20 Ahead of BoE Rate Hike

The Pound to Euro exchange rate (GBP/EUR) has recovered towards 1.2000, close to 19-month highs, as buyers continue to support Sterling ahead of Thursday's Bank of England decision.

A rate hike to 4.00% is widely expected, but the Pound's next move may depend on whether Governor Andrew Bailey signals further tightening or pushes back against aggressive market expectations.

GBP/EUR Forecasts: Testing 1.20

After a correction on dips, the Pound continued to attract buying support with the Pound to Euro (GBP/EUR) exchange rate strengthening back towards the 1.20 level and close to 19-month highs.

Overall Pound sentiment remained firm amid expectations of a Bank of England rate hike and growing optimism over closer UK-EU economic ties, while the Euro was unable to secure sustained support.

OCBC commented; "GBP resilience should extend into early 2027 as fiscal discipline, resilient growth and political stability remain supportive.”

It did add some caution; “With markets already pricing an aggressive BoE tightening cycle, much of the rates support is already in the price. The bar for the next leg higher in GBP is therefore getting increasingly high."

Domestically, the Bank of England policy meeting will be the key event on Thursday with strong expectations of a 25 basis-point hike to 4.00%.

MUFG commented; “We expect the BoE to finally begin tightening policy in response to higher energy prices. BoE officials including Governor Bailey have already signalled that time is running out to keep looking through higher energy prices. At the same time, the case for tightening policy has been encouraged by the persistence of stronger growth in the UK.”

Forward guidance will be the key element for markets.

MUFG added; “However, we expect the BoE to push back against market expectations for more aggressive hikes in the year ahead.”

Markets are currently pricing several additional rate increases during 2027, although many economists expect the Bank to signal a much more gradual path.

Markets will also continue to monitor wider UK economic conditions.

OCBC maintains a positive overall stance; "The broader UK backdrop also remains relatively supportive. Growth has proved resilient, with the OBR upgrading its 2026 growth forecast to 1.2%. Greater political stability and continued fiscal discipline should provide some relative support for GBP, while closer UK-EU economic ties could offer an additional medium-term tailwind."

The UK-EU relationship will come into sharper focus at the November 20 summit, with talks expected to cover reduced agrifood trade barriers, a youth mobility scheme, closer emissions-market links and UK participation in Erasmus+.

Concerns over the French fiscal position are continuing to hamper the Euro.

ING noted; “French spreads didn’t benefit from lower oil prices yesterday, signalling levels above 150bp are the new normal now.”

It added; “It therefore remains hard for the euro to shake out the lingering risk premium, and much more tangible progress is needed for oil to trade sustainably lower from here.”

French fiscal stress has also complicated the European Central Bank outlook, although policymakers are increasingly signalling that another rate increase in December may still be necessary if energy-driven inflation remains elevated.

For GBP/EUR, the immediate focus is now the 1.20 area.

A sustained break above this level would reinforce the bullish trend, while 1.1900-1.1950 should provide initial support if Sterling retreats.

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TAGS: Pound Euro Forecasts