The Pound-to-Euro exchange rate kicked off the new week at 1.1660, heading towards the middle of a range it entered in February. Any moves within this range will likely continue, and only a decisive break of 1.1835 to the top or 1.1457 to the bottom would mean a key shift is taking place.

However, Goldman Sachs analysts have recently upwardly revised their GBP/EUR forecasts, and view 1.19 as a possibility by the end of Q1 2022. The decision rests heavily on forecasts the Bank of England will announce a rate rise early next year, reports Pound Sterling Live.

Market expectations firmed up more on prospects for a hike early next year after the BoE said last week that "some modest tightening of monetary policy over the forecast period was likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term."

"Some developments during the intervening period appear to have strengthened that case," the Bank announced in a statement.

Sterling edged up on the day as UK bond yields rose to highlight rate hike expectations. Yields also rose in the U.S. and Germany last week as investors eyed higher rates elsewhere.

This weakened any Bank of England-led boost to UK yields and Sterling exchange rates.

"We recently revised up our Sterling forecasts after our economists brought forward their projection for rate hikes following firmer inflation prints and strong labour demand, as well as some more hawkish BoE rhetoric about how to respond to those economic developments," said Michael Cahill, a Goldman Sachs analyst.

The Bank of England said that a rate hike this year was not out of the question, as bringing an end to quantitative easing was not essential for rates to increase. The QE programme is forecast to end in December.

"The BoE meeting this week confirmed that change in outlook, and if anything the risks to the first hike now appear to be skewed even earlier, with the MPC explicitly “ruling in” rate hikes this year, even if that seems fairly unlikely," Cahill added.

"Sterling should perform well against this backdrop.”