Sterling has been trading near its strongest level against the euro in well over a year. For anyone watching the pound closely, whether completing a property purchase in France or Spain or running a business that pays European suppliers monthly, this is a moment worth paying attention to.
The move has been driven by a combination of factors. UK inflation remaining above target has sustained the market's expectation that the Bank of England will keep rates elevated, or potentially raise them again in September. Meanwhile, the eurozone has faced its own headwinds, with growth remaining subdued and the ECB navigating a more complicated set of pressures. The result is a rate environment that currently favours the pound.
Currency markets do not move in straight lines, and it would be a mistake to read the current strength as a permanent shift. The pound is benefiting from a specific set of conditions: persistent UK inflation, hawkish signals from a minority within the MPC, and relative eurozone weakness. Any one of these factors could change quickly.
A softer-than-expected UK inflation print in August would weaken the case for a September rate hike and could remove some of sterling's support. Similarly, stronger eurozone data or a hawkish surprise from the ECB could push the euro higher. The current level is a product of the current moment, not a new baseline.
Most analyst forecasts expect sterling to ease back against the euro through the latter part of 2026 and into 2027 as the rate differential between the UK and eurozone narrows. That makes today's level more attractive than it may appear on a longer time horizon.
If you are in the process of buying property in a eurozone country, France, Spain, Portugal or Italy, the current rate environment is working in your favour. Completion stages that require euro transfers are costing you less in sterling terms than they would have a year ago. The question is whether you act now or wait in hope of further improvement.
Our view is that trying to call the top of a currency move is an unreliable strategy. If you have a completion date approaching, locking in a forward contract now at current levels removes the risk of a reversal before your funds need to move. You give up the possibility of a further gain, but you remove the certainty of a potential loss.
For businesses with regular euro outgoings, including supplier payments, staff costs and lease obligations on European premises, the current rate offers an opportunity to reduce costs versus recent months. A structured forward buying programme, where you fix your rate for the next three to six months of anticipated payments, gives your finance team certainty over costs and removes currency risk from your planning entirely.
The alternative is to continue buying euros in the spot market as invoices arrive. That is fine in a stable environment, but the current conditions are anything but stable. Rate expectations, inflation data, and central bank signals are all moving on a month-to-month basis. Spot buying in that environment means you are absorbing that volatility directly into your cost base.
Speak to one of our relationship managers to discuss your upcoming euro requirements. We can build a buying programme around your actual payment schedule and help you make the most of where rates are today.
Our relationship managers can help you lock in current rates and build a buying programme around your upcoming euro payments.