Sterling touched 1.186 against the euro on Wednesday 14 October, its strongest level since June 2025, and has spent most of this week above 1.18. If you import from the eurozone, your euro invoices are cheaper in sterling than at any point in sixteen months. If you export into it, your euro sales are worth less. Either way the question is the same: how much of what you owe, or are owed, in euros over the next three months are you prepared to leave at the mercy of the next three weeks?
Because the next three weeks matter. The pound has risen on a mixture of other people's problems and a shift in what markets expect from the Bank of England, and there are three dates between now and 5 November that could take some of it back. This is not a forecast. It is a description of where things stand on 15 October and what a finance team can usefully do about it.
What is behind the move, and what is not
Most of it is the euro. France's public debt reached 119% of GDP in the second quarter, the bond market has been punishing it, and a French budget still unresolved in a divided parliament keeps the pressure on. ING's Chris Turner said investors are likely to avoid French debt for now, and his colleague Francesco Pesole put it plainly: "idiosyncratic risks surrounding the euro are unlikely to fade anytime soon". Since late September the market has cut about 30 basis points from what it expects of the European Central Bank. The dollar index has made new highs for the year, and the euro is 58% of that basket.
Then there is the Bank of England. In early September ING expected the Bank to hold into 2027 and then cut twice, and forecast sterling at around 1.15 against the euro by year-end. It has since dropped that view, expects a hike in November and now calls sterling its preferred currency after the dollar. The IMF has raised its UK growth forecast for 2026 to 1.3% from 1.0%, and Megan Greene of the Bank's rate-setting committee said the upgrade adds to signs that rates are not very restrictive. Markets have gone further, pricing roughly 100 basis points of increases by next July. Pesole thinks that is too hawkish for 2027, though he says one or two hikes are looking increasingly likely.
Notice what sterling has not done. Against the dollar it fell to 1.3149 on 14 October after a hot US core inflation reading revived talk of a Federal Reserve hike. This is a story about sterling against the euro, not about sterling being strong in general. A business paying dollars has had no such relief.
Three dates that could unwind it
21 October brings September's inflation data, the last CPI reading before the Bank meets. A softer print weakens the case for a November hike and takes some of the support from under the pound. A hot one does the reverse.
28 October is the Budget, and it is the one the market is nervous about. Pantheon Macroeconomics expects the Chancellor's fiscal headroom to shrink to around £19bn from £23.9bn, and reckons another 30 basis point rise in gilt yields would take roughly £5bn off that. Rabobank's positioning data shows speculative net shorts in sterling rising for a third straight week to their highest since June, which is a measure of how many people are set up for a disappointment. Reuters called the Budget a potential downside risk for sterling precisely because investors have shown so little concern about the fiscal outlook so far. Complacency is not the same thing as safety.
5 November is the Bank of England's decision. ING expects a hike. Lloyds has argued that a resilient currency gives policymakers scope to resist importing the Fed's tightening, which is a polite way of saying a strong pound makes a hike less necessary. If the Bank holds while the market is priced for a move, the reaction in sterling is unlikely to be kind.
There is a technical signal too, for those who follow such things. Wednesday's session printed what chart analysts call a shooting star: a spike to 1.1867 and a close near the day's low at 1.1822, about 0.9% above the 21-day moving average of 1.1716. Pound Sterling Live's house view is that a pullback towards that average is the base case, that it is likely to be shallow because the euro's problems are not going anywhere, and that dips are likely to be bought once the Budget is out of the way. ING's working range is 0.84 to 0.85 in EUR/GBP terms, roughly 1.1765 to 1.1905 the way most UK businesses look at it, with what it calls outside risk towards 1.19 while the French budget stays unresolved. Those are the views of people who forecast currencies for a living, and they disagree with each other on the details. That is the normal state of affairs, and it is why the useful question is not where the rate goes next.
What the level means in pounds
Take a EUR 500,000 invoice. At 1.1850 it costs £421,941. At the 21-day average of 1.1716 it costs £426,767. At 1.1500, roughly where ING's year-end forecast sat in early September, it costs £434,783. The gap between the first and the last is £12,842 on a single invoice, before any provider margin or fees. For an exporter receiving EUR 500,000, the same three numbers run the other way: this week's high is the worst of the three outcomes, not the best.
Scale that by your annual euro flow and put it next to your net margin. For a business buying EUR 3 million a year, the difference between 1.1850 and 1.1500 is about £77,000, riding on three dates in a diary. That comparison, exposure against margin, decides whether this is a problem worth managing or a number worth watching. Our five steps to manage currency risk is the short version of how to work it out.
What to check before 28 October
Start by separating what is confirmed from what is forecast. Signed purchase orders, contracted payroll and invoices already received are confirmed. Expected reorders and pipeline are forecasts. The distinction matters because the tools for managing the first are binding, and applying them to the second is how businesses end up holding currency they do not need.
Then decide, deliberately, how much of the confirmed euro exposure between now and January you are comfortable leaving open through the Budget and the Bank's meeting, and write the decision down. Most finance teams have an answer when asked. Far fewer have it written anywhere, which means it gets re-decided every time the rate moves, and usually in the wrong direction. A rate you can budget to is worth more to most importers than the chance of a slightly better one. That is our view rather than a rule, and your margin will tell you whether it applies to you.
Know what the tools actually do. A forward contract fixes today's rate for a payment on a future date. If sterling falls after you book it, the forward has done its job. If sterling climbs further, you still pay the rate you agreed. That is the whole product, both halves of it, and a deposit may be required. A market order is a standing instruction to buy at a level you choose if the market gets there, with no obligation if it does not, and a stop loss caps the worst rate you are prepared to accept. Plenty of businesses use a combination: cover part of the confirmed exposure now and leave an order working for the rest. Our guides to window and flexible forwards and market orders and stop losses explain the mechanics and the risks.
And check your provider's pricing. A move like this week's is exactly when the margin built into your rate is easiest to miss. Ask what it is, in writing, before you trade.
How Millbank FX can help
Our dealers can run this week's levels against your own flows in a free FX strategy session, using Bloomberg market data: what you owe and are owed in euros by month, what a move to 1.17 or 1.15 does to it, and what covering part of it now would cost. No obligation, and businesses already using another provider are welcome. Millbank FX provides forward contracts, market orders and stop losses, named multi-currency accounts and international payments to more than 120 countries, with pricing agreed before you trade. Our FX market analysis page explains how our dealers keep clients informed on what is moving their currencies.
This article is market information, not advice or a forecast. It was written on 15 October 2026 from data reported by Pound Sterling Live, Reuters, ING, Pantheon Macroeconomics and the IMF between 13 and 15 October. Exchange rates fluctuate and past movements are not a guide to future ones. A forward contract fixes a rate that applies whichever way the market moves afterwards and may require a deposit. Figures are illustrative and shown at mid-market rates. Millbank FX is authorised by the Financial Conduct Authority as a payment institution (FRN 787366); client funds are held in safeguarded accounts.
