Pound To Euro Week Ahead Forecast: GBP Hits Five-Week Low Amid UK Political Instability

The Pound to Euro (GBP/EUR) exchange rate slumped to a five-week low last week as escalating political turmoil in Westminster overshadowed stronger UK economic data and rattled Sterling investors.

At the time of writing, GBP/EUR was trading around €1.1482, down roughly 0.7% on the week.

DAILY RECAP:

The Pound (GBP) came under sustained pressure last week as mounting political uncertainty in the UK rattled investor confidence and triggered sharp moves in UK bond markets.

Speculation surrounding Prime Minister Keir Starmer’s future dominated trading sentiment, with markets increasingly focused on whether Labour MPs could force his resignation or trigger a formal leadership contest.

The nervous political backdrop pushed gilt yields to their highest levels in almost three decades as investors grew increasingly concerned about the UK’s fiscal and political outlook.

Sterling was unable to capitalise on stronger domestic economic data amid the turmoil.

Official figures showed the UK economy expanded by a robust 0.6% during the first quarter of 2026, while March GDP unexpectedly rose by 0.3% despite disruption linked to the Middle East conflict and elevated energy prices.

However, political headlines continued to overshadow the data.

Health Secretary Wes Streeting’s resignation on Thursday intensified fears surrounding Labour’s leadership crisis, while renewed speculation surrounding Greater Manchester Mayor Andy Burnham gathered momentum after reports emerged that Labour figures were attempting to pave the way for Burnham’s return to Westminster ahead of a possible leadership bid.

Meanwhile, the Euro (EUR) traded with mixed momentum through the first half of the week.

An unexpected improvement in German economic sentiment initially helped support the single currency, although gains were capped by a firmer US Dollar (USD), with which the Euro traditionally has a negative correlation.

However, the Euro found additional support later in the week as a broader risk-off mood swept through markets.

With investors shunning risk-sensitive currencies amid lingering geopolitical uncertainty, the relatively safer Euro strengthened against the increasingly politically exposed Pound.

GBP/EUR Forecast: Westminster Turmoil to Keep Sterling Under Pressure?

Looking ahead, UK political developments are likely to remain the dominant influence on the Pound to Euro exchange rate this week.

Any further signs that Keir Starmer’s leadership is under threat, or additional momentum building behind figures such as Wes Streeting or Andy Burnham, could inject fresh volatility into Sterling.

GBP investors will also monitor upcoming UK employment and inflation figures closely. Signs of a cooling labour market or softer inflation could dampen expectations for future Bank of England (BoE) interest rate hikes and place additional pressure on the Pound.

For the Euro, attention later in the week will turn to the Eurozone’s preliminary PMI releases.

If the surveys suggest private sector activity across the bloc remained weak or in contraction territory during May, EUR sentiment may soften.

Germany’s latest consumer confidence and Ifo business climate surveys may also influence the common currency if they reinforce concerns surrounding the Eurozone growth outlook.