Blog By David Stritch, Senior Multicurrency Analyst, Caxton | October 19th 2026
The pound opened Monday 19 October at around 1.1887 against the euro (GBP/EUR), its highest level since May 2025 and about 2.3% above where it traded in the last week of September. The main driver is France: the protests and the budget fight in Paris have hit confidence in French government debt, and the euro has taken the strain.
Key takeaways
Sterling has climbed steadily against the euro since late September, and the move is mostly about France. Confidence in France was already very low and has fallen further. The authorities look unable to calm the unrest on the streets or the pressure building in the French government bond market.
This is not a new story, but it has intensified. French borrowing costs jumped during the global bond sell-off, which triggered heavy selling of the euro as investors worried that France’s fragile public finances could spill over into the rest of Europe. Earlier this month the euro dropped to a 17-month low below $1.12, and it also fell against sterling, the Swiss franc and the Japanese yen. At 7:30am today, EUR/USD was trading around 1.1234.
When investors lose faith in a government’s ability to manage its finances, they demand a higher interest rate to lend to it, and they often sell its currency as well. France shares the euro with 19 other countries, so stress in Paris pulls down the whole single currency.
The gap is easy to see in the bond market. Since 18 June, France’s 10-year borrowing cost has risen by 112 basis points (1.12 percentage points). Italy is up 86 and Belgium 80. The UK, at 61, sits in the middle of the pack, below the US and well below the most troubled parts of the eurozone. In a period when the UK might easily have been the market’s target, it has been one of the calmer places to hold government debt.
Investors are buying UK debt in anticipation of a cautious Budget on 28 October. Chancellor John Healey has spent the autumn signalling restraint, and the market is giving him some benefit of the doubt.
The backdrop is still demanding. A sharp global bond sell-off briefly pushed the 30-year gilt yield above 6% in October, eating into a fiscal buffer that stood at £24 billion in March. Allies of the Chancellor have said he will stay well within his own borrowing rules. Currency markets seem relaxed: options pricing suggests traders are not treating the Budget as a major risk event for sterling. whbl.com +2
The next three days matter more than the Budget for the pound’s short-term direction. UK unemployment figures are due on Tuesday 20 October, followed by UK inflation (CPI) on Wednesday 21 October. There are no major releases today.
These figures will feed straight into expectations for the Bank of England’s 5 November meeting. Bank Rate currently stands at 3.75%, and markets are pricing roughly a 94% chance of a rise to 4% next month. That is a lot of confidence. A rise in joblessness combined with softer-than-expected inflation could be enough to chip away at it, and with expectations this high, sterling has more room to fall on a disappointment than to rise on good news. tradersunion
For anyone buying euros, current rates are the best in roughly 17 months. That includes UK firms paying eurozone suppliers, people buying property in Europe, and families sending money abroad. For anyone receiving euros and converting to pounds, the opposite is true: each euro of revenue now buys fewer pounds.
The question is how much of your outcome you want to leave to this week’s data. Some businesses use a forward contract, which fixes an exchange rate today for a payment due later, to lock in part of a known future cost. Others set rate alerts so they can act quickly if the market moves to a level that suits their budget. Neither guarantees the best rate, but both reduce the risk of a nasty surprise.
My read is that the pound is enjoying a period it has not fully earned. Much of this move has been about France’s problems rather than UK strength, and that leaves sterling exposed if this week’s data undercuts the rate-hike story. On the Budget, John Healey has always seemed a safe pair of hands, and 28 October is his chance to prove it. I still expect some tinkering around the edges, with changes to Capital Gains and Inheritance Tax likely, but otherwise a steady hand. If he delivers that, gilts should stay supported and the pound with them.
Why is the pound strong against the euro right now?
Mostly because the euro is weak. France’s budget crisis and continuing unrest have pushed up French borrowing costs and weighed on the single currency, while expectations of a Bank of England rate rise have supported sterling.
Could the pound fall back against the euro this week?
It could. UK unemployment and inflation figures on 20 and 21 October will test expectations of a November rate rise. Weaker jobs data or softer inflation could reduce those expectations and weigh on sterling.
When is the next Bank of England interest rate decision?
Thursday 5 November 2026. Markets currently price a high probability of a 0.25 percentage point rise from 3.75%.
When is the UK Budget, and will it affect the pound?
Chancellor John Healey delivers his first Budget on Wednesday 28 October. Markets expect a cautious package; a Budget that unsettles the gilt market would be the main risk for sterling.
Is now a good time to buy euros?
GBP/EUR is at its highest level since May 2025, which makes euros cheaper than they have been for some time. Whether to act depends on your own timing and needs, and many people choose to secure part of a payment rather than wait for a better rate.
If you have euro payments or receipts coming up, a short conversation with Caxton’s multicurrency dealers can help you decide whether to fix a rate now, set an alert, or wait. Contact your Caxton dealer or check online for a live quote.
Rates quoted are market rates at 7:30am on 19 October 2026. This article is for information only and does not constitute financial advice. Exchange rates can move quickly and past performance is not a guide to future performance.