Pound-to-Euro Holds Near €1.20 as ECB Leadership Race Begins

Modified: Monday, 9 November 2026 20:01 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Holds Near €1.20 as ECB Leadership Race Begins

The Pound to Euro (GBP/EUR) exchange rate traded within a narrow range on Monday as investors weighed uncertainty over the European Central Bank's (ECB) next president against a further decline in UK government borrowing costs.

At the time of writing, GBP/EUR was trading at approximately €1.1989, virtually unchanged from Monday's opening levels and remaining just below the €1.2000 mark.

The Euro (EUR) struggled to establish a clear direction at the start of the week as attention turned towards the race to succeed ECB President Christine Lagarde.

Finance ministers were due to discuss the two formally nominated candidates at Monday's Eurogroup meeting, the first since Lagarde announced her intention to step down in February.

Spain has nominated former Bank of Spain Governor Pablo Hernández de Cos, who is widely regarded as the more dovish candidate.

The Netherlands, meanwhile, has put forward former Dutch central bank chief Klaas Knot, who has a reputation for favouring a more hawkish approach to monetary policy.

The contrasting policy views could have important implications for the Euro, particularly as investors assess how long the ECB may need to maintain elevated borrowing costs to contain inflation.

A victory for Knot could encourage expectations of a more restrictive monetary policy stance, potentially supporting the single currency.

Conversely, the appointment of Hernández de Cos could raise expectations of a more cautious approach to interest rate increases, particularly if economic growth across the Eurozone remains subdued.

However, the ECB president does not determine monetary policy alone, with interest rate decisions requiring agreement across the bank's Governing Council.

As ministers are not expected to reach a final decision at Monday's meeting, investors appeared reluctant to take significant positions based on the leadership contest.

The Pound (GBP), meanwhile, maintained a broadly positive tone against several major currencies as UK government borrowing costs continued to decline.

The benchmark 10-year gilt yield fell to around 5.15% on Monday, reaching its lowest level since the end of August.

The latest decline extended the recovery in UK bond markets following Chancellor John Healey's Autumn Budget, which largely reassured investors about the government's fiscal plans.

Lower borrowing costs have offered some relief to the Treasury, potentially easing concerns about the pressure that debt-servicing costs place on the public finances.

Although declining yields can sometimes weigh on Sterling by reducing the appeal of UK assets, the recent retreat has been interpreted more positively as a sign of improving confidence in the country's fiscal position.

Nevertheless, the Pound struggled to make significant headway against the Euro during Monday's European session.

Investors were also awaiting comments from Bank of England (BoE) Governor Andrew Bailey later in the day.

Following last week's unanimous decision to raise interest rates to 4%, markets will be looking for further indications of how much additional monetary tightening policymakers believe is necessary.

Any suggestion that the BoE remains concerned about persistent inflation could reinforce expectations of further rate increases, providing additional support for Sterling.

Near-Term GBP/EUR Forecast: Could Stronger UK GDP Push Sterling Above €1.20?

The Pound to Euro exchange rate could find fresh momentum later this week as investors turn their attention towards Thursday's preliminary UK GDP figures.

Economists expect third-quarter economic growth to have accelerated from 0.5% to 0.7%.

A reading in line with or above forecasts would suggest that the UK economy maintained a relatively solid pace of expansion despite elevated borrowing costs.

Stronger growth could also give the Bank of England greater confidence that the economy can withstand further interest rate increases, potentially strengthening Sterling's appeal.

Such an outcome may provide GBP/EUR with the momentum needed to establish a sustained move above €1.2000.

However, disappointing GDP figures could revive concerns about the UK's economic outlook and raise questions about how much further the BoE can tighten monetary policy without damaging growth.

A weaker reading could therefore encourage Sterling selling, potentially pushing GBP/EUR back towards €1.1950.

Before Thursday's UK data, the Euro could be influenced by a speech from ECB President Christine Lagarde on Wednesday.

Investors will be watching for any indication that policymakers remain concerned about persistent inflation and are prepared to raise interest rates again.

Hawkish remarks could reinforce expectations of further ECB tightening and provide support for the single currency.

The leadership debate may also remain in focus, although any immediate market reaction is likely to depend on whether ministers offer clearer indications of the preferred candidate.

With GBP/EUR trading close to €1.20, the combination of UK growth figures and central bank commentary could determine whether Sterling finally establishes a convincing break above this threshold or retreats towards the middle of its recent trading range.

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TAGS: Pound Euro Forecasts