The Pound to Euro (GBP/EUR) exchange rate tested the 1.1600 area in March, but failed to break through and has dipped to 4-week lows below 1.1450 amid a slide in risk appetite.
Energy prices and risk trends have dominated with a jump in UK yields while markets are anxiously waiting for evidence on the economic impact.
MUFG considers that increased yield support has protected the Pound, but does not consider this is sustainable and maintains a negative medium-term stance on the Pound. The bank is forecasting a decline to 1.11 by the first quarter of 2027.
The bank notes that the UK is dependent on energy imports, especially given the lack of refining capacity and this will leave the economy in a vulnerable position if there is a sustained increase in energy prices.
Higher bond yields will undermine activity and there will be notable stagflation risks as inflation pressures also increase.
There has been a notable shift in interest rate expectations with the Bank of England now forecasting at least two rate hikes by the end of this year. MUFG considers market expectations are excessive and, at this stage, is backing only one hike, especially as policy is already restrictive.
GBP/EUR — Key Rate Highlights:
Current Rate: 1.145425 (02 Apr 2026, 10:21 UTC)
Daily Move: -0.20% (-0.002325)
Latest Close: 1.147744 (01 Apr)
April Range: 1.144004 – 1.148790
April Performance: +0.30%
12-Month Range: 1.128001 – 1.161281
Recent Trend: GBP/EUR easing slightly after recent gains, with short-term consolidation near early-April highs
Disclaimer: For information only, not investment advice. This GBP to EUR forecast summarises and interprets third-party research; views expressed are those of the original source and may not fully reflect the source’s complete analysis. Neither the source nor we accept liability for reliance on this interpretation.
