Where sterling stands

A pound buys about €1.19 this morning, its highest against the euro since May 2025 and roughly 2% up on the month. The euro touched its lowest level of the year against sterling last week, and the pound is on course for a third straight weekly gain.

This is a euro-weakness story more than a sterling-strength one. The French riots of 17 and 18 October are the latest chapter, not the cause: the move began at the end of September in the French bond market, three weeks before anyone set fire to a town hall.

What is actually driving it

The trigger was French debt, not French streets. In late September the gap between French and German ten-year borrowing costs widened to its largest since 2011, as investors demanded more to hold French bonds ahead of a contested budget. Hedge funds sold the euro on the back of it, and GBP/EUR cleared the €1.175 ceiling that had capped it through August and September.

The riots add to that pressure rather than starting it. Around 550,000 people marched over the cost of living on 17 October; nearly 2,400 were arrested, the Limoges town hall was burnt out and business losses run to hundreds of millions of euros. The French bond spread is the market's thermometer for political and budget risk in the eurozone's second-largest economy, and unrest pushes it up.

Sterling has had its own support at the same time. UK second-quarter growth was revised up to 0.5%, August GDP grew 0.1% against forecasts of a contraction, and markets now price a quarter-point Bank of England rate rise on 5 November. Add a spike in European gas prices, which hits the eurozone's trade balance harder than Britain's, and the euro has had little going for it.

So the honest answer to "is it the riots?" is: partly, and late. Had the weekend passed quietly, sterling would still be around €1.18.

Fifteen years in one picture

Before the referendum, sterling was a different currency. It climbed from €1.11 in the 2011 eurozone debt crisis to €1.42 by August 2015, as the ECB cut rates and launched quantitative easing while the Bank of England sat still. The vote on 23 June 2016 took it from €1.29 to €1.19 within a week, and it has never been back above €1.22 since.

Since 2016 the pound has lived in a band between roughly €1.09 and €1.21. No-deal fears in August 2019, the Covid panic of March 2020 and the Truss mini-budget of September 2022 each tested the floor. The Bank of England holding rates while the ECB cut lifted it to the ceiling in spring 2025, before expectations of UK cuts dragged it back below €1.15 by the end of last year.

Today's €1.19 sits near the top of that band, not outside it. For anyone who remembers €1.40, this is a good rate within the post-Brexit world rather than a return to the old one.

What it means for UK SMEs

Importers are the winners. A €100,000 supplier invoice cost about £87,000 a year ago at €1.15 and costs about £84,000 today at €1.19. That is a 3.4% saving on eurozone stock, components and services, and a reason to bring forward purchases that were going to happen anyway.

Exporters feel the squeeze. A £100,000 order that cost a German customer €115,000 last October now costs them €119,000, so UK goods are 3.5% dearer in the eurozone without a single price rise. Businesses selling into Europe on thin margins should expect pushback at the next price review.

For businesses with euro receivables or euro-denominated facilities, a stronger pound shrinks the sterling value of what is owed to you and what you owe. That cuts both ways: euro borrowing gets cheaper to service, but euro invoices financed through a facility advance less in sterling terms.

On hedging, note that a forward contract does not lock in today's spot. Because UK rates sit above eurozone rates, the forward curve prices GBP/EUR at about €1.18 in three months and €1.167 in a year. Anyone looking to fix a rate for next year's euro costs is buying at a discount to today's headline. This is not advice; it is the arithmetic to take to your broker.

Can it last?

The banks lean yes, cautiously. ING has upgraded its forecast and now prefers sterling to the euro, while MUFG sees Bank of England hike expectations limiting the pound's downside. Forward pricing, which reflects rate differentials rather than a view, has GBP/EUR drifting back towards €1.18 over three months.

Three things could turn it. First, the UK has its own fiscal test: the 30-year gilt yield went through 6% on 1 October for the first time since 1998, and the autumn Budget will be read closely by the same investors now punishing France. Second, France's budget vote on 20 October could calm its bond market as easily as inflame it. Third, the euro's floor is the German bond market; so far Bunds have stayed clear of the contagion, and while that holds the euro's fall is contained.

Our read is that this is a euro-weakness rally at the top of a ten-year range. Worth using, not worth assuming.

Sources

  • Wise, GBP to EUR mid-market rate and 30-day range
  • Pound Sterling Live, GBP/EUR forward rates
  • Pound Sterling Live, pound surges to one-year best against euro
  • FXStreet / MUFG, euro weakness drives sterling gains
  • FXStreet, pound holds firm on stronger growth
  • Reuters via Global Banking & Finance, sterling set for third weekly rise
  • Finimize, pound hits 17-month high against euro
  • CNBC, France hit by worst unrest in years
  • CNN, Macron addresses the nation after protests
  • Pound Sterling Live, Bank of England historical GBP/EUR spot rates by year (chart data, 2011 to 2026)