The Pound-Euro could push higher if Bailey reinforces November hike expectations, while cautious ECB guidance may keep the Euro under pressure.
The Pound Euro (GBP/EUR) exchange rate wavered near 16-month highs on Tuesday as the UK’s 2026 growth forecast was revised higher.
At the time of writing, GBP/EUR was trading at €1.1835, having briefly matched Monday’s 16-month high of €1.1838.
Pound to Euro (GBP/EUR): 1.183859 (+0.01%)
Euro to Dollar (EUR/USD): 1.118563 (+0.23%)
DAILY RECAP:
The Pound (GBP) edged up against its weaker peers on Tuesday after the International Monetary Fund (IMF) upgraded its UK growth forecast for 2026.
The financial institution now expects the British economy to grow 1.3% this year, with IMF Economic Counsellor Silvana Tenreyro saying the UK ‘stands out’ among G7 economies for having a credible plan to reduce its budget deficit.
However, the IMF also modestly cut its growth forecast for 2027 from 1.3% to 1.2%, arguing that persistently high oil prices and rising interest rates could weigh on growth. This limited the Pound’s upside potential.
The Euro (EUR) managed to attract some support at the start of Tuesday’s European session, thanks in part to the common currency’s negative correlation with the US Dollar (USD), as the ‘Greenback’ retreated.
EUR was also supported by a decline in French government borrowing costs. France’s 10-year bond yield dropped to its lowest level in a week on Tuesday.
However, the single currency continued to trade near multi-month lows against many of its peers. With the French parliament debating the government’s budget, the risk of fresh debt crisis fears hung over the Euro.
Near-Term GBP/EUR Forecast: BoE and ECB Chiefs to Speak
Looking forward, Wednesday brings speeches from both the Bank of England (BoE) Governor Andrew Bailey and the European Central Bank (ECB) President Christine Lagarde.
If the BoE chief hints at the need for an interest rate hike next month, Sterling could strengthen. Meanwhile, the Euro could soften if Lagarde sounds cautious about tightening monetary policy further.
Any comments from Lagarde about the French debt crisis could also unnerve EUR investors, particularly if she sounds concerned about its implications for the wider Eurozone.
Our currency coverage draws on live market data, official economic releases and published bank research.
