Exchange Rates UK Research’s latest August 2026 survey of major investment banks suggests the Pound to Euro exchange rate is trading above where most institutions believe it will settle over the medium term.
With GBP/EUR currently at 1.1694, close to its highest level in more than a year, the majority of banks expect the exchange rate to drift back towards 1.14-1.16 through 2027.
Only a handful of institutions forecast sterling strengthening beyond 1.19.
Latest Survey Suggests Sterling’s Outperformance May Moderate
The latest Exchange Rates UK Research poll reveals a more balanced outlook than recent price action would suggest.
Bullish forecasts from Bank of America, UBS and Credit Agricole see GBP/EUR holding between 1.18 and 1.20, implying Pound Sterling can maintain most of its recent gains.
However, the majority of banks – including Citi, CIBC, Goldman Sachs, HSBC, ING, MUFG, Natixis, Nomura, Rabobank, SEB and Scotiabank – expect the pair to ease back into the 1.12-1.16 region over the next 12 to 24 months.
Overall, the survey average points to modest Pound Sterling weakness from current levels rather than another sustained leg higher.
That outlook follows a strong rally.
GBP/EUR has climbed steadily over the past four months, rising from around 1.14 in March to almost 1.17, with July marking a third consecutive monthly gain.
The pair is now trading at its strongest levels since mid-2025 after advancing around 2.5% over the period.
BoE Advantage Narrowing as ECB Turns More Hawkish
A recurring theme across the latest forecasts is that the interest-rate advantage which has underpinned sterling may begin to narrow.
The Bank of England kept Bank Rate unchanged at 3.75% this week, but the decision was accompanied by a three-way split on the Monetary Policy Committee and fresh warnings that energy-driven inflation risks remain elevated.
Meanwhile, the European Central Bank has also paused, but policymakers continue to signal that another interest-rate increase remains possible if higher energy prices feed through into broader inflation pressures.
Eurozone inflation unexpectedly accelerated to 2.9% in July, reinforcing expectations that the ECB could tighten policy again later this year.
This has reduced expectations that UK interest rates will remain significantly above those in the Eurozone for an extended period.
GBP/EUR Outlook: Consensus Favours Gradual Retreat Rather Than Sharp Reversal
The latest Exchange Rates UK Research survey suggests the pound remains fundamentally well supported, but that much of the recent good news may already be reflected in current exchange rates.
Rather than forecasting a sharp reversal, most banks expect GBP/EUR to gradually move back towards the mid-1.10s as monetary policy differences become less pronounced and Eurozone fundamentals improve.
For businesses and holidaymakers buying euros, today’s exchange rate remains close to the strongest seen for more than a year.
If the latest survey proves accurate, these levels could represent some of the most favourable buying opportunities before GBP/EUR settles back towards longer-term equilibrium.
