Why the Pound-to-Euro Hit a Two-Month Best

Modified: Thursday, 1 October 2026 22:11 BST - Written by David Woodsmith

STORY LINK Why the Pound-to-Euro Hit a Two-Month Best

The Pound to Euro (GBP/EUR) exchange rate pushed to a fresh two-month high on Thursday, with Sterling continuing to benefit from expectations of closer ties between the UK and the European Union.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1719, up roughly 0.2% from the start of Thursday’s session.

Sterling retained its recent momentum on Thursday as markets continued to digest Prime Minister Andy Burnham’s comments on the UK’s future relationship with the European Union.

Earlier in the week, Burnham argued that Brexit had ‘done more harm than good’ and called for the UK to consider a range of options for its relationship with the bloc.

These included maintaining the current arrangements, joining a customs union or single market, and ultimately rejoining the EU.

Although any return to the EU would remain a distant prospect, the reaction in currency markets suggests that investors see the removal of some post-Brexit trade barriers as potentially beneficial for UK economic growth.

Additional support for Sterling came ahead of comments from Bank of England (BoE) policymaker Catherine Mann.

Her reputation as one of the bank’s more hawkish voices has raised expectations that she could reinforce speculation around a potential interest rate hike next month.

Demand for the Euro (EUR) remained subdued on Thursday, with the single currency continuing to contend with strength in the US Dollar (USD).

US rate hike expectations have weakened sharply, yet investors continue to favour the ‘Greenback’ ahead of several important US economic releases.

This has in turn limited the Euro’s ability to recover ground against Sterling.

Near-Term GBP/EUR Forecast: Eurozone Inflation Could Give EUR a Lift

Eurozone inflation will take centre stage at the end of the week, potentially giving the Pound Euro exchange rate a fresh source of volatility.

September’s preliminary CPI figures are expected to show annual inflation accelerating to 3.6%, which would mark the highest rate in around three years.

A stronger-than-expected inflation reading could revive speculation around further action from the European Central Bank (ECB), potentially helping the Euro recover some of its recent losses.

With little significant UK data due in the meantime, Sterling is likely to remain sensitive to further comments from Burnham and broader developments across the currency market.

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TAGS: Pound Euro Forecasts