Pound-to-Euro Week Ahead Forecast: Stabilisation Before the Data Test

🎯 GBP/EUR year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. 📩 Request your copy.

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Pound sterling set to stabilise against the euro after a period of weakness.

The British pound should experience further short-term respite against a backdrop of medium-term challenges centred on political uncertainty, poor debt dynamics and a slowing economy.

"A short-lived - at best - respite for the pound," says a note from Barclays bank detailing the pound's short-term prospects. "The PM's position remains precarious, with the Gorton and Denton by-election on 26 February the first major electoral test."

The pound to euro pair fell as low as 1.1444 last week amid uncertainty about Prime Minister Keir Starmer's future, before recovering and stabilising in the region as those fears faded.

The PM will limp on, perhaps for no more compelling a reason than a lack of obvious candidates available to replace him.

For pound-euro, we forecast the 1.1460-1.1500 range will stay intact through the early part of the week before domestic data takes centre stage.

Volatility will pick up on Tuesday and Wednesday when labour market and CPI inflation are due, the data should reinforce expectations for Bank of England rate cuts on at least two more occasions this year.

The UK unemployment rate should stay at 5.1% but the consensus expectation is for a drop in payrolled employment of 20K. Average weekly earnings are forecast at 4.6%.

On Wednesday, the consensus looks for a -0.5% m/m for headline CPI inflation, taking the annual rate to 3.0%. Core CPI is expected to fall to 3.1% and services CPI to 4.3%.

Should these data undershoot by more than expected, then GBP/EUR can test last week's lows towards 1.1440 where medium-term graphical horizontal support is located.

🎯 GBP/EUR year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. 📩 Request your copy.

This line has acted as a fulcrum for the broader sideways GBP/EUR range that has played out since July 2025

However, the market has already adjusted downward its UK interest rate profile, which suggests to us the bar is set high for another major repricing this week, offering the pound some protection against material weakness.

If anything, there's a decent chance of some forays above 1.15 in the event the data meets expectations or even exceeds them. So we'd prefer 1.1510 before 1.1440, but are conscious that gains above here will simply invite selling interest, making rallies short-lived.

Base Case Week Ahead Forecast (Highest Probability):

• Early week consolidation between 1.1460–1.1500
• Mid-week dip risks tilted toward 1.1440 but no lower, more likely to see forays above 1.15.
• Range likely still intact by week’s end unless data significantly disappoints

Strategic Considerations for Money Transfers

With GBP/EUR stabilising in the 1.1460-1.1500 range but facing downside risk toward 1.1440 if UK labour or CPI data undershoots, both euro buyers and sellers should adopt a defensive, staged approach this week: secure a meaningful portion of exposure early while the pair remains mid-range, leave some flexibility around the 1.1440 support area, and use limit orders near 1.1500 to capture any upside surprise, pairing them with protective stops below last week’s lows in case support breaks.

For known future payments, hedge 40–70% via forwards to reduce event risk, as a 1% move from current levels equates to roughly €1,150 per £100,000 traded, making mid-week volatility potentially material for unhedged positions.

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