EUR/GBP Forecast: ING Targets 0.840 as Sterling Looks 2.8% Too Strong Today

The EUR/GBP exchange rate remains under pressure, but ING believes sterling’s recent strength against the euro has gone too far. The bank estimates that the currency pair is trading 2.6%–2.8% below its short-term fair value, suggesting the pound is overvalued relative to the euro. Following the Bank of England’s (BoE) latest rate increase, ING strategist Francesco Pesole sees a recovery toward 0.840 as the most realistic outcome over the coming weeks.

ING Says Sterling Is Overvalued

ING’s valuation models indicate that EUR/GBP is trading significantly below the level justified by short-term economic and market conditions. The estimated 2.6%–2.8% gap suggests that sterling has strengthened beyond what the bank considers sustainable.

The pair traded around 0.8342 on November 9, according to historical market data. A move toward 0.840 would represent a recovery for the euro against sterling, although it would not necessarily signal a lasting reversal in the broader trend.

Pesole attributes part of the euro’s weakness to a risk premium linked to France. Political and fiscal uncertainty in the country has weighed on investor confidence in the single currency, with EUR/GBP serving as one channel through which that concern has been reflected in foreign-exchange markets.

However, ING argues that French-related risks do not fully explain the pair’s decline. The bank considers the recent move excessive even after accounting for that pressure, leaving scope for the euro to recover.

BoE Rate Hike Limits Sterling Upside

The Bank of England raised its benchmark Bank Rate by 25 basis points to 4% at its November 4 meeting. The Monetary Policy Committee voted 8–1 in favour of the increase, with one member preferring a larger 50-basis-point move.

The decision reinforced expectations that UK interest rates could remain elevated. ING believes the absence of dovish dissenters supports its forecast for another rate increase in February, although a December move remains possible.

However, the bank cautions that further tightening may be limited. Higher borrowing costs can support a currency by increasing its yield appeal, but expectations of additional increases may already be reflected in sterling’s valuation.

The UK inflation outlook also remains important. The BoE said consumer inflation reached 3.5% in September and could rise toward 5% by the middle of 2027, partly because of higher energy prices.

EUR/GBP Recovery Toward 0.840 in Focus

ING argues that market expectations for three additional BoE rate cuts are too aggressive. In its assessment, the combination of stretched sterling valuations and the possibility of fewer cuts reduces the scope for further pound appreciation against the euro.

Key factors shaping the pair include:

• 0.8342: Approximate EUR/GBP level on November 9.
• 0.840: ING’s preferred recovery target.
• 2.6%–2.8%: Estimated gap below short-term fair value.
• 4%: Current BoE Bank Rate following November’s increase.

Conclusion

EUR/GBP remains near recent lows, but ING sees growing reasons for sterling’s advance to lose momentum. French political and fiscal concerns continue to weigh on the euro, while the BoE’s hawkish decision has supported the pound. Nevertheless, ING considers sterling overvalued and expects further rate increases to be limited. A recovery toward 0.840 is therefore its preferred near-term scenario, although the timing will depend on incoming UK economic data, central-bank guidance and developments in France.