The Pound Sterling (GBP) remains under pressure heading into 2026 amid flat UK growth and the Bank of England’s ongoing easing cycle. Political uncertainties and ECB rate expectations support a gradual rise in EUR/GBP, projected to reach 0.89 over the next six months, Rabobank’s FX analyst Jane Foley reports.
UK growth flatlines as BoE easing persists
“Despite the relief that followed the UK’s November budget, the pound still faces headwinds into 2026. UK growth appears to be flatlining and the BoE is now in a minority of G10 central banks considered by the market to be still in the throes of its easing cycle.”
“Another risk for the pound next year could come from UK politics. The tone of Reeves’ November budget appeared to be oriented towards appeasing the left of the Labour party. In turn this may be evidence of the vulnerability of her job and potentially that of PM Starmer.”
“ECB rate hike expectations add to the scope for an upside bias in EUR/GBP in 2026. However, this may be tempered by Germany’s struggles with its reform process and its slow growth outlook. Overall, we expect an upward grind in EUR/GBP next year to 0.89 on a 6-month view.”
Source: https://www.fxstreet.com/news/gbp-faces-headwinds-despite-budget-relief-rabobank-202512121613
