Pound-to-Euro Hits 13-Month Best Exchange Rate for Buyers

Modified: Sunday, 19 July 2026 20:36 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Hits 13-Month Best Exchange Rate for Buyers

The British Pound posted strong gains against the Euro this week as markets welcomed reports that incoming Prime Minister Andy Burnham is expected to appoint Shabana Mahmood as Chancellor of the Exchequer.

Pound Sterling also benefited from another strong round of short covering, while the Euro was pressured by higher European gas prices and renewed concerns over the region’s energy outlook.

The Pound-to-Euro exchange rate (GBP/EUR) surged to 13-month highs above 1.18 before easing slightly, although the pair remains close to its strongest levels since 2025.

ING considers there is scope for GBP/EUR to advance towards 1.19 if it can sustain a move above 1.18. The bank, however, remains cautious on the medium-term Pound outlook.

Reports indicate that Burnham is expected to appoint Mahmood rather than Ed Miliband as Chancellor when he takes office on Monday.

Although Mahmood has limited Treasury experience, markets have welcomed the expected appointment as she is viewed as being on the more moderate wing of the Labour Party. There has also been relief among investors that Miliband appears unlikely to secure the role.

Handelsbanken chief economist James Sproule commented; "There's a lot of nervousness about Miliband. He's seen as being more zealous and therefore potentially less willing to listen to market concerns than other potential chancellors."

MUFG noted; “Market participants had been fearful that he would choose a Labour MP from the left of the Labour party such as Ed Miliband who would also have been viewed as less supportive for economic growth given environmental agenda can increase costs, delay projects, or redirect investment away from traditional growth sectors.”

It added; “The appointment would back up recent comments from Andy Burnham stating that his policy agenda would be backed by “sound public finances” and the “discipline of our current fiscal rules”.

According to ING; “The strength of the sterling rally looks more a function of position adjustment rather than a massive re-assessment of the prospects for UK PLC, however.”

The bank noted that futures positioning had recently shown speculators running their shortest Sterling positions since 2017, adding that it may be difficult to stand in the way of the Pound rally in the short term.

SocGen added; “The scale of the move is hard to justify relative to bond spreads and suggests flows tied to hedging or central bank reserve rebalancing or conversion flows are driving the price action in a thin market.”

Pound Serling Forecast: UK Growth Returns Despite Weak Industrial Data

The latest economic data also provided some support for Sterling, with the Office for National Statistics reporting that UK GDP increased 0.1% in May after a 0.1% contraction the previous month, matching consensus forecasts.

GDP expanded 0.7% in the three months to May compared with the previous three-month period, following a revised 0.8% increase in the three months to April.

The services sector remained the main driver of growth, expanding 0.3% on the month.

However, industrial production declined 0.5%, while construction output contracted 0.8%, highlighting continued weakness across parts of the UK economy.

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TAGS: Pound Euro Forecasts