Key Moments
- Bank of America maintains a year-end 2026 EUR/GBP target of 0.84, signaling more downside for the pair.
- Analysts see the current EUR/GBP level, back in its Q3 2025 range, as a consolidation before renewed pound strength.
- Improving UK-EU relations and potential productivity gains support the British pound despite domestic political risks.
Strategists Keep Bearish EUR/GBP View
Bank of America continues to take a negative stance on EUR/GBP for 2026. It reconfirms its year-end target at 0.84. The bank expects the pair to fall further, even while noting possible political hurdles in the UK.
The EUR/GBP rate has returned to the midpoint of its Q3 2025 trading band. BofA analysts see this as a phase of short-term consolidation. They expect the British pound could resume strengthening after this pause.
Pound Outlook Amid Political Risks
BofA describes its view on the British pound as “constructive.” The bank sees the currency’s medium-term outlook as positive. At the same time, it highlights risks, such as the May local elections and a potential UK leadership challenge.
The note also references Bank of England guidance. It suggests policy rates are nearing terminal levels. BofA believes this could cushion the pound from yield declines and limit downside from monetary policy.
UK-EU Relations and Economic Implications
The research notes early-year policy announcements aimed at closer UK-EU engagement. While not forming a formal Customs Union, these steps may reduce structural frictions that have weighed on the UK economy since Brexit.
BofA adds that gradual improvements in UK productivity, driven by closer EU cooperation, should support the pound. These factors underpin the bank’s year-end 0.84 target and expectation of further EUR/GBP weakness.
EUR/GBP Target and Rationale
| Item | Detail |
|---|---|
| Currency pair | EUR/GBP |
| Bank of America stance | Expects further downside |
| Year-end 2026 target | 0.84 |
| Key supports for GBP | Better UK-EU relations, potential productivity gains, limited impact from lower yields |
| Main risks | May local elections, possible UK leadership challenge |
Overall, BofA believes these structural improvements are positive for the pound. They reinforce its forecast for a lower EUR/GBP level by the end of 2026.
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