British Pound to Euro Forecast: Three-Week Best for EUR Buyers

– Written by


Frank Davies

STORY LINK British Pound to Euro Forecast: Three-Week Best for EUR Buyers

The Pound to Euro exchange rate (GBP/EUR) climbed to three-week highs near 1.1515 before easing back toward 1.1485 as volatile energy prices and geopolitical tensions surrounding Iran continued to dominate global markets.

With the Euro under pressure from rising energy costs and crowded long positioning, Sterling found temporary relief, although shifting expectations for Bank of England and European Central Bank policy continue to limit the scope for sustained currency moves.

GBP/EUR forecasts: Hits 3-Week High

The Pound to Euro (GBP/EUR) exchange rate briefly hit 3-week highs close to 1.1515 on Wednesday before a retreat to 1.1485 later in the session.

Markets are continuing to be dominated by the war on Iran with a notable focus on energy prices. There has been some relief in the bond market with the 10-year yield retreating to below 4.40% from above 4.50% on Tuesday.

Scotiabank commented; “Global financial markets have been rocked by the latest resurgence in geopolitical risk and uncertainty has weighed on sentiment, delivering classic risk off moves across most asset classes while also generating some interesting wrinkles within certain markets—specifically FX.”

The Euro-Zone remains dependent on energy imports and the spike in prices sparked a notable Euro retreat, especially as there were very substantial long Euro positions in global markets.

The Iran situation will remain a key element. Scotiabank added; “market participants’ focus is likely to remain centered on geopolitics, energy prices, and the implications for central banks.”

The jump in energy prices has triggered a shift in monetary policy chatter.

There has been a net shift in Bank of England (BOE) expectations with the chances of a March rate cut around 30% compared with 80% seen last week. Markets are also pricing in only a 25% chance of a further rate cut by the end of the year.

Nomura commented; “We still expect a 25bp policy rate cut at the March meeting and another in June, but flag that the decision is now a very close call and will likely depend on how oil prices develop further in the coming weeks.”

The UK PMI services-sector index was confirmed at 53.9 for February. Tim Moore, Economics Director at S&P Global Market Intelligence, commented: “Business activity continued to pick up across the UK service economy in February, with growth holding close to the five-month high seen at the start of 2026.

There will be further concerns surrounding inflation pressures; “Higher payroll costs were widely cited as leading to a strong pace of overall input cost inflation. This contributed to another robust increase in prices charged by service providers, with the pace of inflation little-changed from January’s five-month high.”

There has, however, also been a shift in ECB expectations with markets pricing in around a 40% chance of a rate hike this year, limiting the potential for currency moves.

ING commented; “Suddenly, the ‘good place’ of the ECB is being challenged, and we doubt we will see that resolved in the very near term.”

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TAGS: Pound Euro Forecasts