Image © European Central Bank.
GBP/EUR has risen back into the middle of the 2026 range, where it tends to look most comfortable.
There's potential for consolidation here, but with short-term technical momentum indicators pointing higher, further gains are possible.
How high can the exchange rate go?
At the start of the week we would have judged 1.1550 as a potential line of interest that could have arrested gains, noting this level has provided resistance and support on numerous occasions over the course of the past year.
However, the exchange rate sailed through here on Thursday, which suggests the market looks to target the 1.16 ceiling next.
Those with payment requirements should be cautious, as this is a significant resistance area and we would imagine there are numerous orders placed ahead of 1.16 that could arrest the advance as soon as 1.1690.
In fact, we saw that happen on May 01 when the short-term uptrend stalled at 1.1597 and then reversed. Those with payment requirements should consider engaging a payment specialist to set an order to ensure they don't miss out.
Pound-to-euro is recovering from last week's wobble on news Andy Burnham will likely be the next Prime Minister; traders worried he would test bond markets by borrowing more, which would result in higher inflation and deteriorating debt dynamics
Previously he said the government shouldn't be "in hoc" to bond markets, that fiscal rules should be bent to fund social housing and defence.
However, Monday saw Burnham u-turn and confirm he won't fiddle with the rules, ensuring some political risk premium that was weighing on pound sterling evaporates.
"The pound has backtracked from this month’s weakest levels vs. both the EUR and the GBP in part due to assurances from potential Labour leadership contender Burnham regarding the current Chancellor’s fiscal rules. We see scope for further choppy range trading," says Jane Foley, Senior FX Strategist at Rabobank.
But there's more to the story: oil prices are coming down as hopes build that the war in the Middle East will end.
That's bringing UK bond yields - i.e. government borrowing costs - lower and that's taking some stress out of the system.
Lower oil prices can't come soon enough: May's PMI data released today suggest Britain's private sector economy suffered a notable slowdown in May as political and geopolitical pressures mounted.
That would normally entice the Bank of England into lowering interest rates. However, the headline from the PMI data is that inflationary pressures are building, leaving the Bank with little choice but to hold interest rates.
That guarantees the UK's interest rate advantage over the Eurozone will endure, and for GBP/EUR, that's supportive.