Goldman Backs EUR/GBP Rise In 2026

The Euro to Pound exchange rate (EUR/GBP) is trading at 0.8675, marginally lower on the day but still close to the upper end of its recent range as the British currency once again shows signs of lagging its European FX peers.

EUR/GBP has churned sideways over the past week, completing what Goldman Sachs describes as a “round trip” through a mixed run of UK data releases and shifting risk sentiment across European markets.

While stronger UK retail sales and flash PMI figures provided some late-week relief, they were not enough to convince strategists that sterling’s underlying challenges have been resolved.

Pound Sterling slips back into underperformer role

Foreign exchange analysts at Goldman Sachs argue that the GBP’s relative resilience earlier in January is giving way once more to the forces that underpin their negative sterling view for 2026.

In their assessment, firmer activity data have largely offset, but not reversed, softer inflation and labour market trends.

Goldman expects the latter to reassert themselves over time, reinforcing a broader narrative of UK underperformance.

Beyond the data, the bank highlights two additional factors that have helped re-establish the pound as a laggard among European currencies.

First, renewed discussion around FX-equity correlations has revived the possibility that global asset managers adjust hedge ratios, a dynamic where sterling has historically been less well positioned than its regional peers.

Second, while recent months have seen a justified paring-back of fiscal and political risk premia embedded in the currency, Goldman says this week’s market reaction to headlines served as a reminder that those risks have eased; but not disappeared entirely.

EUR/GBP Technicals: Upside risks persist

From a tactical perspective, EUR/GBP remains well supported despite modest pullbacks.

January’s price action has seen the pair dip from highs near 0.8745, but downside has so far been contained above the 0.8640-0.8650 area, leaving the broader upward bias intact.

Goldman notes that, at the margin, recent developments have been “net supportive” of further sterling underperformance, particularly against currencies that are less exposed to swings in risk sentiment.

EUR/GBP Outlook: Goldman’s tactical topside call

While Goldman has closed out its short GBP/SEK recommendation following strong gains in the Swedish krona, the bank sees current levels as attractive for rotating sterling underperformance trades into EUR/GBP.

On a tactical basis, Goldman recommends positioning for further upside in EUR/GBP, targeting a move to 0.8740, with a stop placed at 0.8595.

The strategy reflects a preference for expressing sterling weakness through the euro rather than higher-beta Scandinavian currencies at this stage of the cycle.

For now, we think the euro to pound exchange rate remains biased to the upside.

Unless UK inflation and labour market data show clearer signs of re-acceleration, Pound Sterling is likely to continue trailing its European peers, leaving the EUR to GBP rate vulnerable to renewed tests of recent highs in the weeks ahead.