Modified: Monday, 9 November 2026 06:31 BST

– Written by


Frank Davies

STORY LINK Pound-to-Euro Week Ahead Forecast: GBP Supported by BoE, Closer EU Ties

The Pound to Euro exchange rate (GBP/EUR) held close to 1.20 after the Bank of England raised interest rates to 4.00% and warned that further tightening may be needed.

Goldman Sachs sees scope for Sterling to advance towards 1.2050 in the short term, although investment banks remain divided over how far UK rates will rise and whether the Pound can sustain its gains into 2027.

GBP/EUR Forecasts: BoE Takes Action

Goldman Sachs sees scope for the Pound to Euro (GBP/EUR) exchange rate to edge higher to 1.2050 in the short term and has revised its 12-month forecast higher to 1.1630 from 1.1360 previously.

MUFG forecasts a retreat to 1.15 by the third quarter of next year.

GBP/EUR tested the 1.20 level during the week before a limited retreat to 1.1980 as overall Pound sentiment held firm in global markets. Overall volatility was contained despite sharp moves in energy prices and equities.

ING commented on the short-term Pound outlook; “EUR/GBP has overshot rate differentials down at these low 0.83 levels, but there seems to be no reason to expect an upside correction just yet.” (Waiting for a GBP/EUR retreat.)

The Bank of England (BoE) increased interest rates by 25 basis points to 4.00%, in line with strong expectations. The bank warned that a further increase was likely unless energy prices declined.

Investment banks continued to debate the outlook for future hikes. MUFG commented; “Our base case remains one further hike in February, the next projection meeting, completing a moderate and gradual tightening cycle.”

It added; “That said, today’s broadly hawkish tone does shift the balance of risks. A December move and a terminal rate of 4.5% are both more plausible now. The energy backdrop will remain the key swing factor for the former, while more concrete evidence of second-round effects would be needed, we think, for a higher terminal rate.”

Danske Bank noted; “We change our call and add two further 25bp hikes in February and April, taking Bank Rate to 4.50%, unless a lasting resolution to the conflict is reached.”

UK and Euro-Zone fiscal policy will also be a key underlying element.

According to Rabobank; “A reduction in the [UK] fiscal headroom is not good news, but crucially this is a self-imposed discipline. Compared with some other G7 countries, and most notably France, at least the UK has a budget consolidation plan in place.”

It added; “The UK’s fiscal position is far from enviable, but at least it has an improving primary deficit which should provide some reassurance for GBP markets.”

The government is continuing to push towards closer ties with the Euro area which could have an important impact on medium-term Pound sentiment.

Goldman Sachs commented; “The prospects for EU reintegration have continued to garner market focus – and unwinding even a fraction of our estimated 6% cumulative impact of Brexit on Sterling would imply a significant boost to the currency, but the path to achieving these outcomes is highly uncertain and gradual.”

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TAGS: Pound Euro Forecasts