Overview
- Sterling strengthened to about €1.162, its best level since August 2025, after markets pushed the currency higher on Wednesday.
- Analysts say the move was driven by higher UK gilt yields and a large policy‑rate gap with the ECB that makes pound assets more attractive to yield‑seeking investors.
- June Eurozone PMI showing easing price pressures and softer growth weakened the euro by reducing expectations of further ECB rate rises.
- Currency specialists are urging Britons to buy holiday euros now to lock in extra spending power, while warning the rally could reverse if UK political or fiscal risks, stronger Eurozone data, or a narrowing rate gap emerge.
- The episode reflects a common carry‑trade dynamic that boosts importers and holidaymakers but hurts exporters, and it follows similar sterling volatility seen last August, so markets expect swings if economic or political conditions change.