EUR/GBP Seen Rising to 0.87 by September 2027

For investors, the call matters because it frames sterling’s rally as a valuation story rather than a clean macro victory. Kit Juckes, Société Générale’s currency strategist, said the widening in European yield differentials had supported the pound recently, but argued that over the past decade sterling has risen about 20% in real, inflation-adjusted terms, making British goods and services less competitive abroad.

That valuation gap matters for the wider economy. A stronger real pound can help consumers on foreign travel, but it squeezes exporters and leaves UK growth more dependent on domestic demand. Société Générale said tighter fiscal policy is coming and pointed to the 28 October Budget as a key test for investors weighing the trade-off between market confidence and weaker demand.

The bank’s broader view is that higher UK prices than those seen in Europe are forcing sterling to do more of the adjustment. It said the pound is getting steadily more expensive in real effective terms as inflation runs above levels elsewhere in Europe, while the balance of payments remains a risk.

The euro does not look like an easy alternative in the near term. Société Générale said elevated global bond yields have pushed French and Italian yields higher and revived concerns over fiscal sustainability, while high energy prices are also weighing on the single currency. It added that bearish euro positions in futures markets are large, which could limit further downside in EUR/USD even if the backdrop remains negative.

The technical picture in FX-linked funds also reflects a nervous market. The euro ETF FXE recently fell to 103.41, with its 50-day moving average at 105.90 and its 200-day moving average at 106.64, while RSI readings around 30 suggest the fund is oversold. Sterling-focused FXB was last at 127.32, holding slightly above its 200-day average near 128.15.

For traders, the near-term risk is that the pound stays supported by rate differentials and positioning, delaying any move toward Société Générale’s 2027 forecast. But the medium-term narrative is shifting toward a currency that may have run ahead of UK fundamentals, especially if November’s Budget and the broader fiscal outlook fail to deliver a durable growth backdrop.