Pound-Euro Forecast to Endure a Soft Week

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GBP/EUR hits a three-week low on Monday at 1.1515.

Pound sterling will remain at risk of bond market jitters during the coming days as investors grapple with fears that the Iran war will leave energy prices elevated for longer.

Pound-euro slid ahead of the weekend amidst a rout in global bonds on Friday that sent yields for those bonds materially higher, with the UK proving particularly hard-hit amongst the G10 countries.

UK two- and ten-year bond yields rallied by more than comparable peers because the UK is a net energy importer with a particularly public sector debt burden, meaning international investors typically demand a premium to hold British debt.

The risk for the British pound in the coming week is that these tensions continue to build. For those with upcoming transfers, this type of environment tends to shift the focus toward managing downside risk rather than waiting for improvement, particularly where timing can materially affect the outcome.

Above: UK ten-year bonds now trade at a premium to major peers.

With that in mind, we're watching for signs the UK government will copy other countries and announce costly measures to subsidise oil or gas users at a time when its finances are already under strain.

With global debt markets being flooded with debt, there's a real risk that markets would baulk at such a move and send the pound lower.

"Risks of a more expansionary fiscal policy have likely risen in the wake of the energy shock," says a weekly FX analysis update from Barclays.

To be sure, foreign exchange markets are yet to show signs of panic, and for now, pound sterling's losses remain orderly and contained. But it is important to highlight the warning signs in the market that those with international payments should be factoring in, particularly where even modest moves in the exchange rate can affect the final amount received.

GBP/EUR has been trending lower ever since it peaked at 1.1612 ten days ago, with Monday seeing a new three-week low reached at 1.1515.

This is the location of the 50-day moving average, which could offer some support, although looking at recent history shows this particular indicator hasn't been of much use and might not arrest the selloff.

Provided bond markets settle - and that's a big 'if' considering the war in the Middle East isn't any closer to ending - then we would look for GBP/EUR to drif closer to 1.15.

The decline will be interspersed with the one or two up days where the exchange rate recovers towards 1.1550, but overall, these rallies will likely be sold into.

Strategy: Managing GBP/EUR Risk

The current setup suggests sterling remains exposed to further weakness if external pressures persist.

If you need to buy euros in the near term, acting sooner may help reduce exposure to further declines.

If your transfer is not urgent, monitoring whether GBP/EUR stabilises around 1.15 may provide additional clarity.

In more uncertain conditions, splitting transfers can help manage risk while retaining flexibility if the market shifts.

Where larger amounts are involved, having access to guidance can help navigate both timing and execution more effectively.

👉 For help, our partners at Horizon Currency offer one-on-one support through the entire transfer process.