– Written by
Tim Boyer
STORY LINK British Pound-to-Euro Forecast: GBP Steady on Iran, Energy Prices
The Pound to Euro exchange rate has struggled to extend gains above 1.1550 as geopolitical tensions and energy price developments dominate market sentiment.
With risk appetite deteriorating, GBP/EUR has consolidated despite limited domestic data influences.
GBP/EUR Forecasts: Consolidation Below 1.1550
The Pound to Euro (GBP/EUR) exchange rate advanced to above 1.1550 in European trading on Tuesday before a retreat to 1.1535.
ING is forecasting a GBP/EUR decline to 1.11 by the end of 2026 as the Bank of England continues to cut interest rates.
European stocks initially hit a record high in European trading while the German DAX index was looking to build on 10 consecutive daily gains.
There was, however, a more defensive stance later in the session with equities losing ground while precious metals posted renewed gains.
Save on Your GBP/EUR Transfer
Get better rates and lower fees on your next international money transfer.
Compare TorFX with top UK banks in seconds and see how much you could save.
Overall risk appetite dipped following comments from President Trump that Iranians should continue protesting as help was on the way.
There was fresh speculation over military intervention against the Iranian regime.
Weaker risk conditions tend to curb Pound support, although higher energy prices would tend to undermine the Euro.
Iranian developments and energy prices will remain key short-term components with markets also monitoring wider geo-political issues.
Rabobank is concerned about the Greenland situation.
It noted; “For Europe, this backdrop is beyond ‘challenging’. Via Greenland, Trump is pointing out that ‘rules-based’ sovereignty doesn’t mean a thing if you can’t defend said territory – which they can’t.”
Geo-political developments will tend to dominate in the short term, but interest rate policies will be vital over the medium term.
The British Retail Consortium (BRC) reported an increase in like-for-like retail sales of 1.0% in the year to December from 1.2% previously and slightly below consensus forecasts of 1.3%.
Total retail sales increased by 1.2% year on year in December, against growth of 3.2% in December 2024 and below the 12-month average growth of 2.3%.
Food sales increased 3.1% with a 0.3% decline in non-food sales.
BRC chief executive Helen Dickinson commented; “It was a drab Christmas for retailers, as sales growth slowed for the fourth consecutive month.
She added; “These figures show that consumer spending remains cautious, with households squeezed by the rising cost of living.
ING sees scope for further rate cuts and commented; “Our view that the BoE will cut in March remains more dovish than market pricing (10bp) and underpins our call for a gradual appreciation of EUR/GBP in the coming months.
In contrast, markets are not expecting further ECB rate cuts.
Danske Bank commented on the latest Euro-Zone inflation data; “service inflation declined slightly to 3.4% y/y but with momentum consistent to recent months, it remains sticky and a key argument for the hawk camp in the ECB.”
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
