Deutsche Bank Pound To Euro Forecast 2026: GBP/EUR Forecast 1.11 By 2027 - Exchange Rates UK
Deutsche Bank's projection for the GBP/EUR exchange rate indicates a weakening of the pound against the euro, forecasting a rate of 1.11 by 2027. This suggests a cautious outlook for the UK's economic trajectory, considering factors such as inflation pressures and potential interest rate movements by the Bank of England. The forecast aligns with a broader consensus that the eurozone may outperform the UK economically in coming years. Deutsche Bank's analysis implies that any recovery in the UK may be sluggish compared to the strengthening eurozone economy, influenced by ongoing geopolitical tensions and market volatility.
What the desk is arguing
Deutsche Bank's forecast projects the GBP/EUR exchange rate to reach 1.11 by 2027, indicating a bearish sentiment towards the pound. This outlook reflects expectations of economic challenges facing the UK, including persistent inflation and potential delays in monetary policy adjustments.
Supporting this prediction, Deutsche Bank suggests that structural differences between the UK and eurozone economies will prevail, with the latter potentially benefiting from more stable growth and favorable policy responses. The assumption that the eurozone will recover more robustly implies a divergence in monetary policy trajectories, adversely affecting the pound.
The implicit counterfactual to this outlook would be a scenario where the UK successfully manages inflation and boosts economic growth, leading to a stronger pound. However, current data does not support such a bullish perspective on the GBP against the EUR in the medium to longer term.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Deutsche Bank forecasts GBP/EUR at 1.11 by 2027, reflecting a bearish view on the pound.
- 02Economic challenges in the UK, including high inflation, underpin this forecast.
- 03Divergence in growth expectations between the UK and eurozone is a key factor in this outlook.
Market implications
The forecast by Deutsche Bank could lead to increased selling pressure on the pound, particularly from institutional investors who may re-evaluate their GBP positions in light of this pessimistic outlook. Furthermore, if the pound weakens as predicted, it may also prompt shifts in hedging strategies among corporates with exposure to GBP earnings.
Risks to this view
The primary risk to Deutsche Bank's outlook lies in potential unexpected economic resilience in the UK, which could lead to a stronger pound. Additionally, shifts in central bank policies, such as a more aggressive stance by the Bank of England, could alter the dynamics and strengthen the GBP against the euro.
Sources & References
How we cover this story