Pound to Euro Forecast: Crédit Agricole and UniCredit See a Pullback From Recent Highs
Sterling ended the week near €1.20, but Crédit Agricole says further gains depend on UK figures strong enough to bring forward the next expected rate rise.
The Pound to Euro exchange rate ended Friday at €1.1986, little changed from Thursday despite a Bank of England vote that surprised investors with the strength of support for higher rates.
Crédit Agricole and UniCredit both put the British Pound near €1.163 for the final quarter of 2026, around 3% below Friday’s close. The banks publish their forecasts the other way round, at 86 pence per Euro.
For Crédit Agricole, the question is what the Bank of England can deliver beyond the increases investors already expect. By the time of its Friday report, the UK rates market had almost fully priced in three further rises. That left little room for Sterling to gain simply because policymakers kept another hike on the table.
What would it take to push the Pound Sterling higher?
All nine members of the Monetary Policy Committee voted to raise rates on Thursday. Eight backed the quarter-point increase to 4%, while Catherine Mann wanted a half-point rise. Even the members expected to oppose tightening voted with the majority.
Crédit Agricole’s Valentin Marinov saw some benefit for Sterling in that outcome, particularly against currencies offering lower yields. His reservation was how much investors had already paid for the prospect of higher UK rates.
“That said, with the UK rates market almost fully pricing in three additional rate hikes from here, many BoE-related positives are already in the price of the GBP. It would thus take positive UK data surprises from here that could encourage rate investors to frontload their rate hike bets to give the GBP a boost in the near term.”
The September UK GDP figures offer an early test. A stronger reading could bring forward expectations for the next rise. Growth broadly in line with forecasts would give investors less reason to pay more for the Pound, even if they still expect the BoE to tighten again.
MUFG sees more life in Sterling’s rally
MUFG’s Lee Hardman puts more weight on the combination of stronger British growth, relatively high UK yields and fiscal concerns across the Channel.
“The GBP has recently been supported by growing optimism over stronger UK growth, higher UK yields and fiscal concerns becoming a bigger market issue in the euro area than in the UK.”
That last point matters particularly for GBP/EUR. Renewed pressure on French government bonds could weaken the Euro and lift the pair even if expectations for UK rates barely change.
MUFG also sees a domestic reason for Sterling to hold its gains. Stronger exports and investment have helped UK activity exceed the BoE’s expectations. If that leaves businesses with less spare capacity, the Bank has more reason to worry about persistent price pressure. Hardman expects another rate rise in February and sees a greater chance of an earlier move in December following Thursday’s vote.
What this means for GBP/EUR
The two banks forecasting a retreat from €1.20 differ on how long it might last. Crédit Agricole keeps EUR/GBP at 0.86 in both December 2026 and March 2027, equivalent to about €1.163 per Pound. By December 2027 it sees the Euro back at 84 pence, putting Sterling near €1.190.
UniCredit sees a deeper pullback in the first half of next year. Its EUR/GBP projection moves from 0.86 in the fourth quarter of 2026 to 0.87 in each of the next two quarters, equivalent to roughly €1.149 per Pound.
At close to €1.20, Sterling already buys more Euros than either bank expects at year-end. MUFG’s case for holding that premium has two distinct sources of support: UK activity could keep surprising the BoE, or French fiscal concerns could make investors more reluctant to hold Euros.
Our currency coverage draws on live market data, official economic releases and published bank research.
