MUFG Pound To Euro 2026-2027 Projection: GBP/EUR Expected at 1.11 Due to BoE Interest Rate Reductions

Pound to Euro Exchange Rate Outlook

The GBP/EUR exchange rate recently climbed to its highest level in three months, surpassing 1.1560 before easing back to 1.1510. According to MUFG, the British Pound is unlikely to maintain these gains and is projected to decline to 1.11 by the close of 2026, as diminishing yield advantages weigh on the currency.

Decisions from the Bank of England and shifts in monetary policy are expected to play a crucial role in shaping the Pound's trajectory. While current market expectations suggest fewer than two rate reductions in 2026, MUFG anticipates that the BoE will implement at least two rate cuts by August. The bank also predicts a further slowdown in wage growth, which could ease inflation in the services sector and persuade a majority of policymakers to support these rate cuts.