British Pound to Euro Forecast: ANZ Cautious as GBP/EUR Tests 20-Month Highs

Modified: Tuesday, 10 November 2026 16:31 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: ANZ Cautious as GBP/EUR Tests 20-Month Highs

The Pound to Euro exchange rate (GBP/EUR) held close to 20-month highs around 1.1980 as Sterling continued to attract buyers despite renewed volatility in global equity markets.

However, ING and ANZ warn that the Pound's rally is becoming stretched, with expectations of further Bank of England rate hikes already heavily priced and increasingly hawkish ECB signals offering the Euro some protection.

GBP/EUR Forecasts: Close to 20-Month Highs

After some evidence of vulnerability when equity markets retreated sharply, Sterling has continued to find support on dips with the Pound to Euro (GBP/EUR) exchange rate trading close to 1.1980 and still near 20-month highs.

Investment banks remain generally reluctant to chase the Pound substantially higher at current levels.

ANZ commented; “The cross [EUR/GBP] has fallen to around 0.834, well below its key daily moving averages. The broader trend is lower, but with the BoE and ECB expected to tighten and substantial UK tightening priced in, we would not chase EUR/GBP downside [buy GBP/EUR] from current levels.”

ING is also cautious over further Pound buying at these levels; “EUR/GBP continues to trade sharply below its short-term fair value, by around 2.6-2.8% according to our models. That continues to reflect the euro’s idiosyncratic premium related to French risk, but even accounting for that, the decline in the pair looks a bit too stretched.”

BoE Debate Shifts towards December and February

Bank of England policy will continue to be monitored closely following last week's increase in Bank Rate to 4.00%.

The debate has now shifted towards whether policymakers will deliver another increase in December or wait until February.

Deputy Governor Clare Lombardelli said on Tuesday that persistent inflation risks are crystallising and that both meetings remain possible opportunities for further tightening, depending on energy prices and incoming inflation and labour-market data.

ING has argued that consensus around another increase will be harder to achieve next time, with some policymakers considering a one-and-done approach.

Governor Andrew Bailey has also signalled caution over the extent of further tightening.

Market pricing for several additional rate increases therefore still looks aggressive to a number of investment banks, limiting the scope for Sterling to benefit purely from another shift in yield expectations.

Commerzbank maintains the view that the next increase is more likely to come in February than December, particularly if Middle East tensions ease and energy prices begin to normalise.

ECB December Hike Risk Offers Euro Some Protection

The Euro has also gained a potential source of support from increasingly hawkish ECB commentary.

ECB chief economist Philip Lane said on Tuesday that a December rate increase may be necessary if current economic and inflation conditions persist.

Eurozone inflation reached 4.0% in October, and policymakers remain concerned that the energy shock could generate broader price pressures.

This limits the extent to which widening UK rate expectations can continue to favour Sterling.

The Euro-Zone Sentix investor confidence index edged lower to 2.4 in November from 2.7 previously, but remained above consensus forecasts of 2.1.

Sentix commented; “Whilst the economy in the eurozone remains stagnant, there are at least signs of a slight economic recovery in Germany – albeit in tiny steps.”

Markets are also monitoring the race to replace ECB President Christine Lagarde, who will leave office on February 7.

Former Dutch central bank governor Klaas Knot and former Bank of Spain governor Pablo Hernández de Cos are the two nominated candidates, with EU leaders aiming to settle the appointment in December.

For GBP/EUR, 1.20 remains the immediate resistance area.

A sustained break above this level would strengthen the bullish technical picture, while 1.1900-1.1950 should provide initial support.

For now, Sterling remains underpinned by resilient UK growth and expectations of further BoE tightening, but the combination of stretched valuation and a potentially more hawkish ECB limits the case for aggressively chasing GBP/EUR higher.

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TAGS: Pound Euro Forecasts