EUR/GBP Slow Grind Higher In 2026

The Euro to Pound (EUR/GBP) exchange rate climbed to 0.8785 (+0.58%), its highest level since 2023, as the pound weakened ahead of the UK’s November 26 Budget.

Foreign exchange analysts at Rabobank note that the Pound Sterling has come under renewed pressure against the single currency, with EUR/GBP breaking above its July high, driven by softer UK data and growing fiscal concerns.

The latest BRC shop price index showed a modest 1.0% year-on-year rise, a weaker reading that “could be taken as an encouraging sign by BoE policy doves, which would be a negative factor for the pound.”

At the same time, a Financial Times report suggesting the OBR will sharply downgrade its UK productivity forecast added to the gloom. Based on estimates from the IFS think tank, Rabobank calculates that “each 0.1ppt downgrade in productivity will increase the size of the UK’s fiscal black hole by GBP 7bn.” The anticipated 0.3ppt downgrade, therefore, implies “even more tax hikes, spending cuts or gilt supply than many market participants had been preparing for.”

The bank argues that these developments reinforce its view for a slow grind higher in EUR/GBP into 2026. “We continue to expect a slow creep higher in EUR/GBP to 0.89 by the middle of next year,” it said, while cautioning that the move is unlikely to be swift given already crowded euro-long positioning.

Rabobank expects two more Bank of England rate cuts next year, in February and April, compared with its forecast that the ECB has already completed its easing cycle.

The pound’s near-term fate, it added, will hinge on the credibility of Chancellor Reeves’s Budget and whether concerns over productivity and fiscal discipline ease in the weeks ahead.

Quarterly Pound-Euro Predictions Summary

Our latest Currency Sentiment Survey Report shows the Pound-to-Euro rate likely to reach around 1.1392 by December 2025, 1.1344 by March 2026 and 1.1328 by June 2026.

Below is a table of quarterly predictions:

See our freely accessible full sentiment survey poll results for the pound to euro forecasts here.