Exchange Rates UK Research’s latest May 2026 survey of major investment banks shows the Pound-to-Euro exchange rate is expected to remain broadly supported above €1.15 in the near term, although forecasts increasingly diverge over the longer-term outlook.
While several banks continue to forecast GBP/EUR strengthening towards €1.18–€1.20, others expect sterling to weaken steadily against the euro, with some projections falling back towards the €1.11–€1.13 region by 2027–2028.
The latest survey suggests the pound’s strong recovery against the euro may be entering a more uncertain phase.
Latest Survey Suggests GBP/EUR Rally Is Losing Momentum
The latest Exchange Rates UK Research poll reveals a much wider spread of forecasts than was visible earlier in the year.
On the bullish side, RBC Capital Markets, UBS, Westpac, Natixis and Scotiabank all expect GBP/EUR to move towards the €1.18–€1.20 area over time, reflecting expectations that UK interest rates will remain relatively supportive and that Eurozone growth will continue to lag.
By contrast, Citi and Danske Bank have become notably more cautious on sterling, with forecasts implying GBP/EUR falling back towards €1.11–€1.13 over the longer term.
Overall, however, the survey average still points towards broad stability around current levels, rather than a major directional move.
That outlook reflects recent market behaviour.
GBP/EUR rallied strongly from below €1.14 earlier in the year and briefly tested the €1.16 area during May before losing momentum. Recent sessions have seen the pair drift back towards €1.15 as investors reassess the outlook for both the Bank of England and European Central Bank.
Even so, the pound remains significantly stronger than it was during much of 2024 and continues to trade above its longer-term five-year average range.
ECB and BoE Outlooks Are Becoming More Closely Matched
A key reason behind the more divided forecasts is that the interest-rate advantage which has supported sterling may no longer be widening.
For much of the past two years, higher UK inflation and relatively firm Bank of England policy helped support GBP/EUR.
However, the outlook has become more complicated.
The European Central Bank is increasingly expected to maintain a hawkish stance following the energy-price shock linked to the Middle East conflict, with economists now expecting further ECB tightening during 2026.
At the same time, slowing UK growth, softer retail spending and rising political uncertainty have created fresh questions about the pound’s ability to continue outperforming.
Recent geopolitical developments have also complicated the picture.
Higher energy prices have tended to weigh more heavily on Europe than the UK historically, but analysts increasingly argue that both economies are now facing similar inflation and growth challenges. That has reduced the scope for large policy divergence between the ECB and Bank of England.
GBP/EUR Outlook: Stable Consensus, But Wider Forecast Range Emerging
The latest Exchange Rates UK Research survey suggests GBP/EUR is likely to remain broadly anchored around the €1.14–€1.16 region in the near term.
However, the longer-term outlook is becoming noticeably less unified.
Some banks continue to forecast further pound gains towards levels not seen since before the post-pandemic inflation cycle, while others believe sterling’s recent outperformance is close to peaking.
For now, the consensus GBP outlook remains one of relative stability.
But the widening gap between bullish and bearish forecasts suggests the next major trend in GBP/EUR will likely depend on whether the Bank of England can maintain its policy advantage over the ECB as both economies navigate slower growth and persistent inflation pressures.
