The Bank of England’s decision to hold its benchmark rate at 3.75% in September—despite a 6–3 hawkish split—has set the stage for further tightening ahead, with UBS projecting EUR/GBP to weaken toward 0.84 by December 2026. The European Central Bank’s recent rate hikes, including a second increase to 2.5% in September, have further narrowed the yield differential between the UK and eurozone, intensifying pressure on sterling’s exchange rate.
BoE Rate Hold Signals GBP/EUR Outlook Amid ECB Tightening
UBS forecasts EUR/GBP to dip toward 0.84 by year-end 2026 as BoE’s mixed vote signals potential future hikes, while ECB’s rate hikes and UK’s yield premium shape carry trade dynamics.
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Sophie Laurent · FX & Rates Desk · 18 Sept 2026 · 10:00 · 1 min read
This article was produced with AI assistance and edited by a Finance Review Daily journalist.
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Written by
Sophie Laurent
FX & Rates Desk
Sophie covers currency markets and central bank policy across Europe, with a focus on how rate decisions ripple through FX pairs. She has been tracking the ECB's policy path since the start of the current easing cycle.
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