{"id":127319,"date":"2026-10-20T14:00:00","date_gmt":"2026-10-20T13:00:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=127319"},"modified":"2026-10-20T13:59:26","modified_gmt":"2026-10-20T12:59:26","slug":"the-british-pound-just-hit-a-17-month-high","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/the-british-pound-just-hit-a-17-month-high\/","title":{"rendered":"The British Pound Just Hit a 17-Month High as Two Major Threats Hit the Euro"},"content":{"rendered":"\n

The British pound has climbed to its strongest level against the euro in 17 months, benefiting from political unrest in France, surging energy prices and renewed confidence in the UK economy. Yet an approaching British budget and uncertainty over interest rates could quickly test the currency’s gains.<\/p>\n\n\n\n

France\u2019s Political Turmoil Puts the Euro Under Pressure<\/h2>\n\n\n\n

Sterling rose 0.25% against the euro on October 19<\/strong>, pushing the European currency down to 84.11 pence. Earlier in the trading session, the euro briefly touched 83.95 pence, its weakest level against the pound since May 2025.<\/p>\n\n\n\n

According to Reuters<\/a>, the currency movement followed some of France’s worst street unrest in years, which heightened concerns about political stability in one of the eurozone’s largest economies.<\/p>\n\n\n\n

Investors also demanded a higher premium for holding French government debt. The yield spread between French OAT bonds and German Bunds, widely considered a safer European benchmark, widened by several basis points.<\/p>\n\n\n\n

The pressure extended beyond politics. European natural gas prices climbed to a four-year high, adding another source of uncertainty for economies already exposed to volatile energy costs.<\/p>\n\n\n\n

Together, these developments weakened the euro while sterling benefited from relatively more favorable economic conditions at home.<\/p>\n\n\n\n

\"UK-close-up
Credit: Shutterstock<\/figcaption><\/figure>\n\n\n\n

Stronger UK Growth Gives the Pound Support<\/h2>\n\n\n\n

Britain’s latest economic figures provided another reason for investors to favor sterling.<\/p>\n\n\n\n

Data released the previous week showed that the UK economy grew faster than expected<\/strong> in August, challenging concerns about the country’s economic momentum.<\/p>\n\n\n\n

The stronger performance complicated expectations for the Bank of England’s next interest rate decisions.<\/p>\n\n\n\n

Analysts at Commerzbank suggested that economic resilience could give policymakers room to raise borrowing costs without placing excessive pressure on growth.<\/p>\n\n\n\n

Higher interest rates can support a currency by making assets denominated in that currency more attractive to investors.<\/p>\n\n\n\n

Confidence in the British government’s ability to support economic growth while maintaining fiscal discipline also helped sterling.<\/p>\n\n\n\n

Yet the pound’s strength was largely concentrated against the euro. Against the US dollar, sterling slipped 0.05% to $1.3327<\/strong>, reflecting the dollar’s broader strength in international markets.<\/p>\n\n\n\n

HSBC Warns That the Pound Remains Vulnerable<\/h2>\n\n\n\n

Despite sterling’s recent gains, HSBC questioned whether the British currency could maintain its position, particularly against the dollar.<\/p>\n\n\n\n

The bank pointed to a potential divergence between the Federal Reserve and the Bank of England, with American interest rates potentially remaining elevated for longer.<\/p>\n\n\n\n

\n

\u201cUS rates may remain restrictive for longer, supporting the dollar, while US activity and full employment offer a firmer foundation. By contrast, UK growth momentum is fragile,\u201d they added.<\/p>\n<\/blockquote>\n\n\n\n

The warning highlights a distinction between sterling’s performance against the euro and its broader economic outlook.<\/p>\n\n\n\n

Bank of England Governor Andrew Bailey also addressed the uncertainty surrounding energy prices on October 16.<\/p>\n\n\n\n

Bailey said rising energy costs had so far produced limited wider effects on British prices, but warned that it was too early to determine the extent of possible secondary inflationary pressures.<\/p>\n\n\n\n

Such effects could emerge if higher energy costs spread into wages, services and other consumer prices.<\/p>\n\n\n\n

The October 28 Budget Could Change Sterling\u2019s Direction<\/h2>\n\n\n\n

Investors now face a significant test of confidence in Britain’s public finances.<\/p>\n\n\n\n

The government’s October 28 budget <\/strong>will provide fresh evidence of whether its fiscal plans can sustain market confidence while supporting economic activity.<\/p>\n\n\n\n

HSBC identified the announcement as an additional downside risk for sterling, suggesting that investors may hesitate to build substantial positions in the currency before assessing the proposed measures.<\/p>\n\n\n\n

The bank also expects markets to examine UK government bond yields, fiscal credibility and the potential consequences for monetary policy.<\/p>\n\n\n\n

Recent financial turbulence elsewhere has reinforced concerns that confidence can deteriorate rapidly when investors begin questioning a government’s fiscal trajectory.<\/p>\n\n\n\n

For now, sterling’s advantage against the euro remains intact, but its next direction may depend on how investors respond to Britain’s fiscal plans.<\/p>\n\n\n\n

The October 28 budget is scheduled nine days after the pound reached its strongest level against the euro since May 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"

The British pound has surged to a 17-month high against the euro as political unrest in France and soaring energy prices weigh on the European currency. But with a major UK budget approaching and HSBC warning of economic risks, sterling’s rally could face a serious test.<\/p>\n","protected":false},"author":2,"featured_media":127320,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":["post-127319","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/127319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=127319"}],"version-history":[{"count":2,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/127319\/revisions"}],"predecessor-version":[{"id":127322,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/127319\/revisions\/127322"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/127320"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=127319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=127319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=127319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}