Pound-to-Euro Forecast for New Week: GBP/EUR Braces for Crucial ECB Decision

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Forecast for New Week: GBP/EUR Braces for Crucial ECB Decision

The Pound to Euro exchange rate (GBP/EUR) held close to 1.1570 during the week as investors balanced UK political uncertainty against growing expectations of another European Central Bank interest rate increase.

With the ECB widely expected to raise rates this week and attention increasingly turning towards the June 18 Makerfield by-election, markets face a crucial test for both Sterling and the Euro.

GBP/EUR Forecasts: ECB call next

Barclays Bank expects the Pound to Euro (GBP/EUR) exchange rate to retreat to 1.1240-1.1360 during the Summer period amid Pound jitters.

Despite near-term risks, Credit Agricole expects limited GBP/EUR gains to 1.1630 by year end as the Euro struggles.

GBP/EUR secured a limited advance to 1.1570 during the week.

Politics and economic factors will continue to drive Pound moves over the next few weeks at least with the near-term focus on the ECB policy decision.

According to Credit Agricole; “The near-term GBP outlook would depend on the quality of the UK GDP data. In addition, FX investors could increasingly start to focus their attention on the by-election in Makerfield and therefore the prospects for Andrew Burnham to return to the House of Commons and launch his leadership bid.”

Barclays commented; “The Makerfield by-election on 18 June remains a key signpost that is likely to re-ignite the discussion around fiscal policy risks were Burnham to return to Westminster and challenge for the Labour Party leadership.”

It added; “As political tensions build further, a re-widening of the pound’s premium towards levels last observed in late 2025 around the Autumn statement saga is plausible, which is consistent with 0.88-0.89 in euro/pound.” (1.1240 – 1.1360 for GBP/EUR)

MUFG considered the political outlook; “there is always a risk that Burnham could attempt to bend the rules or implement policies that lack credibility and hence there is a risk of increased fiscal uncertainties that leads to renewed Gilt market underperformance.”

It added; “The pound is set to weaken over the forecast period versus the euro.”

Bank of England policy will also be a key element. Market sentiment has shifted with traders not expecting a June hike.

According to SEB macro strategist Gustav Helgesson; “Obviously it will depend on what happens with underlying inflation, but as long as we don’t see any big surprises there, the Bank of England could sit this out and, from a rate-differential perspective, this should weaken the pound.”

The situation is, however, likely to be complicated by the wider impact on UK fundamentals. Helgesson noted; “If there was an end to the war, it could also ease pressure on the public finances, which could act as a positive for sterling.”

There are strong expectations that the ECB will hike rates this week.

ING looked at the underlying inflation dynamics; “The longer the crisis drags on, the greater the risk of second-round inflation effects.”

The bank’s guidance will also be a key factor.

According to Credit Agricole; “A ‘dovish hike’ by the ECB would thus do little to boost the EUR rate appeal and leave it vulnerable amid persistent geopolitical risks.

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TAGS: Pound Euro Forecasts