British Pound to Euro Forecast: Sterling Stalls at 1.20 Despite Growth Surge

Modified: Sunday, 15 November 2026 22:16 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: Sterling Stalls at 1.20 Despite Growth Surge

The Pound to Euro exchange rate (GBP/EUR) struggled to break above 1.2000 despite stronger-than-expected UK GDP figures and growing expectations of further Bank of England rate hikes.

Pound Sterling remained supported around 1.1960, but the prospect of another European Central Bank increase in December has helped the Euro resist further losses.

GBP/EUR Forecasts: Holds Below 1.20

The Pound to Euro (GBP/EUR) exchange rate remained close to 1.1960 at the end of the week, with stronger UK growth data failing to trigger a fresh challenge of the key 1.20 level.

Sterling retained a firm underlying tone, but the Euro also found some protection from expectations that the European Central Bank will raise interest rates again in December.

The immediate GBP/EUR picture therefore remains one of consolidation, with 1.20 providing important resistance and the 1.1900-1.1950 region offering support.

On a monthly basis, UK GDP increased 0.2% in September compared with consensus forecasts for no change, while the August estimate was revised down to show no growth rather than the previously reported 0.1% increase.

GDP expanded 0.7% during the third quarter, accelerating from 0.5% in the previous three-month period and marking the strongest quarterly growth rate in two-and-a-half years.

The services sector grew 0.9%, while production recorded marginal growth and construction output declined 0.7% despite a recovery in September.

ONS chief economist Grant Fitzner commented; "The economy grew robustly in the third quarter almost entirely due to strong and widespread growth in the services sector."

He added; "Within services, computer programming again increased strongly, as it has all year, registering its fastest growth in the last three years. We continue to see evidence that AI linked businesses helped to boost this sector."

Strong UK Growth Keeps BoE Tightening Debate Alive

ING commented; “The UK economy has had a remarkable run through 2026 and as of September, there was little sign of that coming to an end. But with inflation on the rise, growth is likely to slow through the winter.”

The strength of the economy is increasingly influencing the Bank of England's policy debate.

Chief economist Huw Pill said on Friday that rates will probably need to rise further during 2027 in order to bring inflation sustainably back towards the 2% target.

Pill indicated that another increase in December is likely and warned that persistent energy costs could feed through into wages and broader price-setting behaviour.

ING also expects further tightening; “For the Bank of England, the strength in GDP this year is evidently beginning to play a bigger role in its decision-making. It’s one of the reasons we expect another rate hike in February.”

The bank nevertheless sees signs that monetary policy is already exerting a restrictive influence and expects growth to slow next year.

The housing market remains one area of weakness.

The RICS house-price balance fell to -36% in October from -34% previously and was slightly weaker than expected.

RICS head of market research Tarrant Parsons commented; “Home buyer demand remains subdued, and respondents are bracing for a weaker year ahead for sales given the persistent macroeconomic challenges being faced.”

ECB December Hike Offers Euro Protection

The Euro has also retained some underlying support from expectations of another ECB rate increase.

A Reuters poll published last week found that all 71 economists surveyed expect the ECB to raise its deposit rate by 25 basis points to 2.75% in December.

Most economists expect that to be the final increase in the current tightening cycle, although around a third see the possibility of another move in early 2027.

Eurozone inflation reached 4.0% in October, while persistent energy risks and elevated core inflation continue to keep policymakers cautious.

This limits the extent to which strong UK growth and additional BoE tightening can translate directly into further GBP/EUR gains.

For the pair, 1.20 remains the key upside resistance level.

A sustained break above this area would strengthen the bullish outlook and bring 1.2050-1.2100 into focus.

On the downside, 1.1900-1.1950 should provide initial support.

For now, stronger UK growth is keeping the Pound well supported, but increasingly hawkish ECB expectations are making it difficult for GBP/EUR to break decisively above 1.20.

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TAGS: Pound Euro Forecasts