Sterling has outperformed expectations despite higher energy and borrowing costs, with the latest Budget avoiding any fresh fiscal slippage. The government stayed within its fiscal rules and kept a GBP15bn buffer against the stability rule, even as it absorbed higher debt interest costs linked to the Middle East conflict. Against that backdrop, EUR/GBP projections have been adjusted to reflect continued GBP resilience versus the euro into early 2027.
Constructive Macro Picture and Upgraded Forecasts
The macro picture remains constructive, with the OBR upgrading its 2026 UK growth forecast to 1.2% and a steadier political environment reinforcing the policy mix. Potentially closer UK–EU economic ties are also described as a medium-term support factor.
Implications for Sterling’s Future Upside
However, with an aggressive Bank of England tightening cycle already priced by markets, rate-driven support for GBP looks largely embedded, leaving further upside reliant on a run of increasingly positive UK data surprises.
