FX analysts expect the Euro-Pound rate to hold near 0.8550-0.8600 before rising to 0.87 in Q4 2026 as UK fiscal pressure weighs on Sterling.
The Euro to Pound (EUR/GBP) exchange rate closed close to 0.8592 on Friday, almost exactly where ING expects the pair to trade before a fourth-quarter breakout.
ING’s position is not based on an immediate deterioration in UK interest-rate support.
Instead, the bank expects concern about government borrowing, gilt yields and the forthcoming Budget to weaken Sterling once the present range gives way.
“Elsewhere, EUR/GBP is consolidating after breaking above 0.86 yesterday. No doubt the gilt sell-off, and what it means for strained UK public finances, played a role there.”
ING believes EUR/GBP can continue trading between 0.8550 and 0.8600 in the near term.
The pair briefly reached 0.8607 during the latest 48-hour period but failed to retain the move, returning to the middle of ING’s expected band.
UK rate expectations may help explain that resilience.
Persistent services inflation has led markets to price the possibility of further Bank of England tightening, supporting the Pound despite fiscal anxiety.
“It seems too early to get the all-clear on inflation, meaning that up to 60bp of BoE tightening can sit in UK money markets for a while longer. That probably means EUR/GBP can trade 0.8550-0.8600 before breaking higher to 0.87 in the fourth quarter.”
This creates a useful distinction between the short-term and fourth-quarter outlooks.
Higher BoE expectations can defend Sterling temporarily, but they do not remove the threat posed by rising government financing costs.
The fiscal route to 0.87
The UK Budget is likely to determine whether ING’s breakout materialises.
A credible package could calm the gilt market and delay the move.
A combination of higher taxes, weak growth assumptions and persistent borrowing pressure would be more difficult for the Pound.
“The new UK Chancellor, John Healey, is expected to make his first major political speech early next week, which will no doubt emphasise fiscal responsibility.”
The market will judge the numbers rather than the language.
If fiscal plans fail to stabilise longer-term borrowing costs, foreign investors could demand a larger risk premium for holding Sterling assets.
Our chart above shows repeated failures near 0.8605-0.8607 and support emerging around 0.8583.
A confirmed break above 0.8610 would be the first indication that ING’s fourth-quarter move is beginning early.
Below 0.8550, the forecast would require a larger reversal.
For now, EUR/GBP is still trading the range.
Foreign exchange analyst at ING expect the eventual exit to be higher, with 0.87 representing its Q4 destination.
Our currency coverage draws on live market data, official economic releases and published bank research.
