Sterling has surged to its highest level against the euro in nearly a year, giving British holidaymakers heading to Europe a significant spending boost. On Thursday morning, the pound was trading at around €1.1607, close to a 10-month high and its best level since August 2025. The rally has been driven by expectations that UK interest rates will remain higher than those in the eurozone, making sterling more attractive to international investors.
Experts Urge Travellers to Act Now
Prem Raja, head of trading floor at Currencies 4 You, urged travellers to take advantage of the favourable exchange rate. He said: "Buy your holiday money now. The Pound is having one of its strongest periods against the Euro in almost a year. Holidaymakers, overseas property buyers and importers are the big winners as their money goes further abroad."
The pound hit €1.162 earlier this week, marking its highest level against the single currency since August last year. Currency specialists say the move reflects the growing gap between interest rates in Britain and the eurozone. While the Bank of England has been cautious about cutting borrowing costs, inflation pressures in Europe have eased, leading investors to expect a looser stance from the European Central Bank.
How Much More Spending Money?
For holidaymakers, the gains may appear modest but can quickly add up. A family exchanging £2,000 would receive around €2,320 at current rates, potentially leaving them with tens of euros more spending money than if they had exchanged their cash just a few months ago. Those heading to Spain, France, Italy and Greece will find their money goes further, while buyers of overseas property or importers of European goods could also benefit.
Tony Redondo, founder of Cosmos Currency Exchange, told Newspage: "As ever in currency markets, value is relative. On the Pound side, elevated UK bond yields remain a key driver while the carry trade still matters: the 10-year gilt yield sits 63% above the German Bund and 29% above the French equivalent, drawing capital into the Pound versus the Euro provided global sentiment stays constructive."
Winners and Losers
However, not everyone benefits from a stronger pound. Paul Denley, chief executive of Oakham Wealth Management, said businesses exporting goods and services to Europe could find themselves at a disadvantage. He said: "Sterling's strength reflects several converging forces. The Bank of England's policy rate sits around 150 basis points above the ECB's, making Sterling attractive to yield-hungry investors. UK data has also held up better than expected, while the Euro has faced its own headwinds from softer growth and a stronger dollar.
"Winners include holidaymakers, importers and businesses buying overseas. Losers include exporters, overseas earners, and UK investors with global exposure, whose foreign assets translate back into fewer pounds."
Rally May Not Last
Experts warn the pound's fortunes could quickly reverse if confidence in the UK economy weakens. Nouran Moustafa, practice principal and IFA at Roxton Wealth, said: "Sterling is rising for two reasons: markets are pricing in a calmer UK political handover, and the Euro is weakening as investors expect the ECB to be less hawkish than the Bank of England.
"The winners are British holidaymakers, importers and anyone buying in Euros. The losers are UK exporters, businesses paid in Euros and overseas visitors, because Britain becomes more expensive. A strong Pound feels good at the airport; it is less helpful if it starts hurting competitiveness."
Watch Out for Airport Rates
Travel money experts caution that holidaymakers should not assume they will receive the headline exchange rate. Rates offered by airports and some high street bureaux de change can be significantly lower than those available online or through specialist currency providers.
