Pound-to-Euro Forecast: GBP Slips Following BoE Rate Decision

The Pound-Euro rate could remain under pressure if UK retail sales disappoint, while a hawkish Lagarde speech may offer the Euro fresh support.

The Pound to Euro (GBP/EUR) exchange rate was subdued on Thursday as markets digested the Bank of England’s (BoE) latest interest rate decision.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1656. A modest decline from the start of Thursday’s session.

DAILY RECAP:

The Pound (GBP) tracked lower against the majority of its peers on Thursday, as the Bank of England concluded its September policy meeting.

As was widely expected, the BoE opted to leave interest rates on hold again this month, with policymakers voting 6-3 in favour of maintaining the current rate despite fresh inflation risks.

Sterling sentiment softened as markets viewed the voting split and the bank’s statement as leaning more dovish than some investors had hoped, particularly as there is still significant tightening priced in for before the end of 2026.

However, the bank also signalled it would slow down the pace of its quantitative tightening programme, a move that triggered a sharp fall in UK gilt yields and relieved some of the pressure on the Pound.

The Euro (EUR) was subdued on Thursday, with the single currency nursing its wounds after its strong inverse relationship with the US Dollar (USD) proved a major liability on Wednesday.

USD exchange rates surged in mid-week trade as the Federal Reserve delivered a hawkish hike, raising interest rates by 25bps as expected, while also signalling that more tightening would be required by the end of the year.

Further undermining EUR sentiment was the publication of the Eurozone’s finalised inflation figures for August, which reported that price growth was slightly slower than previously thought.

Near-Term GBP/EUR Forecast: Continued Slump in UK Retail Sales to Soften Sterling Sentiment?

Turning to the end of the week, the Pound Euro exchange rate could face headwinds with the publication of the UK’s latest retail sales data.

August’s data is forecast to show consumer spending contracted for the second consecutive month, likely raising fresh fears over the resilience of the UK’s vital services sector.

Meanwhile, EUR investors will look to a speech by European Central Bank (ECB) President Christine Lagarde for fresh impetus on Friday, with a hawkish tilt potentially providing fresh support for the euro.

Our currency coverage draws on live market data, official economic releases and published bank research.