GBP/EUR Forecast: Strongest UK Growth in Two Years Fails to Lift Pound

Modified: Thursday, 12 November 2026 20:31 BST - Written by James Fuller

STORY LINK GBP/EUR Forecast: Strongest UK Growth in Two Years Fails to Lift Pound

The Pound to Euro (GBP/EUR) exchange rate traded sideways on Thursday as stronger-than-expected UK economic growth failed to provide Sterling with a significant boost.

At the time of writing, GBP/EUR was hovering around €1.1962, leaving the pairing virtually unchanged from Thursday's opening levels and still trading just below the psychologically important €1.2000 mark.

The Pound (GBP) struggled to gain momentum despite figures showing that the British economy recorded its strongest quarterly expansion in more than two years.

Data from the Office for National Statistics (ONS) revealed that UK gross domestic product (GDP) increased by 0.7% during the third quarter.

This marked the fastest quarter-on-quarter growth in over two years, offering some reassurance about the resilience of the British economy despite elevated borrowing costs.

However, the positive figures failed to generate much enthusiasm among Sterling investors, with the reading broadly matching market expectations.

As a result, the data offered little reason for traders to reassess their positions or significantly revise their outlook for UK interest rates.

Instead, attention remained focused on the Bank of England (BoE) and its approach to tackling persistent inflation.

Although policymakers unanimously voted to raise Bank Rate to 4% last week, concerns remain that the central bank may not be tightening monetary policy quickly enough to bring inflation under control.

The National Institute of Economic and Social Research (NIESR) recently warned that UK borrowing costs may ultimately need to reach 5% to contain underlying price pressures.

Such an outcome would require a more aggressive tightening cycle than the Bank of England's latest guidance currently suggests.

For Sterling, this creates an uncertain outlook.

While higher interest rates can increase the appeal of Pound-denominated assets, investors are also concerned that prolonged monetary tightening could eventually undermine economic growth.

Thursday's GDP figures provided some reassurance about the economy's current strength, but did little to resolve questions about the future path of UK interest rates.

The Euro (EUR), meanwhile, also struggled to establish a clear direction as investors awaited comments from European Central Bank (ECB) President Christine Lagarde later in the day.

Markets were particularly interested in whether Lagarde would offer any fresh indications about the ECB's monetary policy outlook.

Recent comments from Federal Reserve policymakers have raised expectations that the US central bank could adopt a more aggressive approach to interest rate increases.

Following stronger-than-expected US inflation figures earlier in the week, speculation has grown that the Fed could consider a larger 50-basis-point hike in December.

The ECB, however, is expected to pursue a more measured approach to monetary tightening.

Concerns about the Eurozone's economic outlook, particularly the fiscal challenges facing France, have complicated the central bank's policy decisions.

French government borrowing costs have eased recently, but uncertainty surrounding the country's public finances remains a potential source of instability for the wider currency bloc.

The prospect of a growing divergence between the ECB and Federal Reserve has also weighed on sentiment towards the Euro, limiting its ability to advance against Sterling.

Near-Term GBP/EUR Forecast: Could Weak Eurozone GDP Lift Sterling Towards €1.20?

The Pound to Euro exchange rate could find fresh direction on Friday with the publication of the Eurozone's latest economic growth figures.

The second estimate of third-quarter GDP is expected to confirm that quarterly growth slowed from 0.6% to 0.4%.

Such a reading would suggest that the Eurozone economy lost momentum during the summer, reinforcing concerns about the impact of elevated energy costs and borrowing rates on economic activity.

Investors will be particularly interested in the outlook for France and Germany, the bloc's two largest economies.

Evidence of weaker growth could raise questions about how much further the European Central Bank can tighten monetary policy without placing additional pressure on economic activity.

A disappointing GDP reading could therefore weigh on the Euro, potentially allowing GBP/EUR to recover towards the €1.2000 level.

A sustained move above this threshold would mark an improvement in Sterling's near-term outlook following its recent retreat from an 18-month high.

However, stronger-than-expected Eurozone growth could provide some reassurance about the currency bloc's resilience, potentially supporting the single currency.

For the Pound, Friday's relatively quiet UK economic calendar means Sterling may struggle to establish a clear direction of its own.

Investors are likely to continue assessing Thursday's GDP figures alongside the Bank of England's latest policy guidance.

Although the UK economy's stronger performance could provide some underlying support, uncertainty about the pace of future interest rate increases may limit Sterling's gains.

GBP/EUR could therefore remain confined to a relatively narrow trading range unless Friday's Eurozone figures deliver a significant surprise.

With the pairing trading around €1.1962, the €1.2000 level remains the immediate upside reference point, while a renewed decline could bring the €1.1900 area back into focus.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts