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Pound Sterling Faces 1.15 Euro Risk Before 2027

By Markets Desk · 2026-09-20 · 2 min read
Two distinct banknotes resting on a wooden desk surface
Illustration: Tradingbird

ING forecasts a drop to 1.15, while Crédit Agricole predicts a rise to 1.19 by late 2027.

The British pound faces a potential decline to 1.15 against the euro by the end of 2026. This projection comes from ING, which expects the currency to weaken further. Current market prices stand near 1.16, leaving little room for error. The divergence in forecasts highlights uncertainty in the near term.

Crédit Agricole offers a contrasting view for the following year. The bank expects the pound to strengthen to 1.19 by December 2027. This recovery would follow a period of relative stability in late 2026. The pair closed at 1.1662 on Friday, showing minimal weekly change despite mid-week volatility.

Bank Forecasts Diverge

ING targets a EUR/GBP rate of 0.87 for December 2026. This translates to a GBP/EUR rate of approximately 1.1494. Crédit Agricole forecasts a slightly stronger pound at 0.86, or 1.1628. The two institutions agree on a weak first half of the period but differ on the trajectory. ING sees continued pressure on sterling throughout the year.

Crédit Agricole sees the pound holding steady through early 2027. The bank projects a gradual strengthening from June onward. By September 2027, the rate could reach 1.1905. This view assumes the current weakness is already priced in. The bank believes the currency has bottomed out relative to the euro.

Bank of England Stance

The Bank of England held rates at 3.75% on Thursday. The decision passed with a 6-3 vote. The central bank warned that inflation risks have increased since July. This hawkish tone contradicted ING's expectation of dovish communication. Sterling fell immediately after the announcement despite the tougher warning.

ING argues that investors expect too much tightening from the UK. The bank sees 41 basis points of hikes priced in by December. A single quarter-point increase might disappoint these pre-meeting expectations. This mismatch creates downside risk for the pound. The bank expects these factors to feed into a weaker sterling.

Eurozone Energy Constraints

Crédit Agricole notes that the Eurozone faces its own challenges. The region must deal with a negative energy supply shock. This limits the euro's potential to outperform the pound. The bank believes some negatives are already priced into GBP. The relative weakness of the euro supports a future pound recovery.

The bank's Bank Rate forecasts stay at 3.75% through June 2027. Rates are expected to decline to 3.25% by December 2027. The 1.19 target reflects a recovery in relative appeal. This recovery can coexist with eventual UK rate cuts. The source, Exchange Rates UK, highlights this nuanced view.

Based on reporting by Exchange Rates UK, compiled by the Tradingbird desk.

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