Two of Europe's big banks agree on where sterling is heading against the euro — down. Crédit Agricole and UniCredit both put the pound near €1.163 by the end of 2026, around 3 per cent below Friday's close, after the Bank of England's rate rise left the currency almost unmoved.

Sterling ended Friday at €1.1986, little changed from Thursday despite a Bank of England vote that surprised investors with the strength of support for higher rates. Currency broker Cambridge Currencies, tracking European Central Bank reference rates, recorded sterling finishing the week almost exactly where it started, with the pound-euro rate down just 0.04 per cent across a week that included a UK rate rise, the United States midterm elections and the American jobs report.

The banks' shared call rests on a simple argument: the market has already paid for the Bank of England's next moves. By the time Crédit Agricole published its Friday report, the UK rates market had almost fully priced in three further rises, leaving little room for sterling to gain simply because policymakers kept another increase on the table.

Valentin Marinov, a strategist at Crédit Agricole, put it this way: "That said, with the UK rates market almost fully pricing in three additional rate hikes from here, many BoE-related positives are already in the price of the GBP. It would thus take positive UK data surprises from here that could encourage rate investors to frontload their rate hike bets to give the GBP a boost in the near term."

The vote itself was emphatic. All nine members of the Monetary Policy Committee backed an increase on Thursday. Eight supported the quarter-point rise that took Bank Rate to 4 per cent, while Catherine Mann wanted a half-point rise. Nobody voted to hold rates, a sharp change from September, when the committee had split six to three for no change.

What could prove the banks wrong is the data. The September UK GDP figures offer an early test, and the Bank's own November report expects growth of 0.7 per cent in the third quarter — a figure Thursday's release will check directly. A stronger reading could bring forward expectations for the next rise, while growth in line with forecasts would give investors less reason to pay more for the pound. United States inflation figures land on Tuesday, the week's biggest release for currency markets.

The two banks part company on how long sterling's retreat lasts. Crédit Agricole keeps its euro-sterling forecast at 0.86 — about €1.163 per pound — in both December 2026 and March 2027, before seeing the euro back at 84 pence, or sterling near €1.190, by December 2027. UniCredit sees a deeper pullback in the first half of next year, with its projection moving to 0.87 in each of the next two quarters, equivalent to roughly €1.149 per pound.

Not everyone expects sterling to give ground. Lee Hardman at MUFG puts more weight on stronger British growth, relatively high UK yields and fiscal concerns becoming a bigger market issue in the euro area than in the UK. He expects another rate rise in February and sees a greater chance of an earlier move in December following Thursday's vote. Renewed pressure on French government bonds could weaken the euro and lift the pound-euro rate even if expectations for UK rates barely change.

The rate backdrop favours sterling for now. At 4 per cent, Bank Rate sits 150 basis points above the European Central Bank's 2.50 per cent deposit rate and 12.5 basis points above the United States Federal Reserve's 3.875 per cent midpoint. But the Bank itself expects UK inflation, at 3.5 per cent in September, to rise towards 5 per cent by the middle of next year — and its own survey of market participants points to Bank Rate at 4.25 per cent in February. The next decision comes on 17 December. Forecasts are not guarantees: the pound's direction from here will be set by the data, starting with Thursday's growth figures.