Pound Sterling: GBP/EUR Above 1.15?

GBP/EUR year-ahead forecast: Median, range and upside/downside risks based on projections from 20+ investment banks and FX analysts.View forecasts

The Pound to Euro (GBP/EUR) exchange rate is trading higher, with Sterling steadied by shifting rate expectations as investors weigh the UK fiscal outlook against an unsettled global backdrop.

DAILY RECAP:

Pound Sterling’s tone has been influenced by a reassessment of near-term rate-cut expectations, as markets look through domestic headlines and focus on inflation risks stemming from higher energy prices.

The UK spring forecast commentary has added to the debate about how much fiscal space exists to absorb a renewed external shock, and what that means for growth and gilt market sensitivity.

A jump in geopolitical risk has kept investors alert to second-round inflation effects via energy, which can feed into wage demands and services pricing even if the initial shock is temporary.

In practice, that has made the next Bank of England decision feel more data-dependent, with traders wary of pricing an aggressive easing path if energy costs remain elevated.

On the Euro side, the single currency has been supported by an inflation surprise that complicates the near-term policy narrative for the European Central Bank.

Eurozone inflation is estimated to have risen to 1.9% in February, while core inflation picked up to 2.4%, reinforcing the idea that underlying price pressures have not fully faded.

“Clearly, the jump in core inflation indicates that price pressures have not fully eased,” analysts at ING said.

That inflation backdrop has helped lift European front-end yields and reduced confidence that policy can ease quickly, even as growth concerns linger.

Overall risk sentiment has remained fragile amid Middle East headlines, and that has kept cross-asset correlations unstable, with FX reacting quickly to moves in rates and energy markets.

Near-Term GBP/EUR Forecast: Inflation, Energy and Central Banks in Focus

The next major catalyst for the BP/EUR exchange rate is the market’s evolving view on whether higher energy prices delay the BoE’s next cut, which would typically support the Pound against the Euro.

If upcoming UK activity or labour-market data weakens decisively, it would likely revive rate-cut conviction and cap any Pound Sterling rebound.

GBP/EUR year-ahead forecast: Median, range and upside/downside risks based on projections from 20+ investment banks and FX analysts.View forecasts

For the Euro, incoming inflation detail and ECB communication ahead of the 19 March meeting will be crucial for rate expectations and near-term EUR resilience.

A firmer inflation pulse or a more cautious ECB tone would tend to underpin the Euro and limit GBP/EUR upside.

Conversely, if markets conclude the inflation uptick is transient and growth risks dominate, the Euro could soften as traders rebuild expectations for easier policy.

Geopolitics and energy remain swing factors, because a renewed spike in oil and gas prices would harden inflation concerns on both sides of the channel but could also trigger broader risk-off flows.

In that scenario, the cross may trade more like a rates spread story than a pure risk barometer, making bond market moves unusually influential day-to-day.

Catalyst one is UK rate pricing around the March BoE meeting, where a reduced likelihood of a cut would be an upside risk for GBP/EUR.

Catalyst two is Eurozone inflation momentum into the ECB meeting, where stickier core pressures would be a downside risk for GBP/EUR.

Levels for buyers to watch are support near 1.13 and resistance near 1.21.