Pound Sterling Hits 2026 Highs Against Euro on Dollar Weakness

UK gilt yields have risen relative to German Bunds. The 10-year spread reached 195 basis points on Friday, the widest since April. That yield advantage directly supports sterling crosses, traders said. The pound's rally against the euro has been orderly, with no sharp positioning shifts that sometimes precede a reversal. Options markets show demand for downside protection on EUR/GBP, not upside, suggesting the trend has room to run.

The next test for sterling comes Tuesday with UK GDP data for May. A print in line with the 0.2% month-on-month consensus would reinforce the narrative of a UK economy growing faster than the eurozone. A miss would reopen debate about the timing of BOE easing. On the US side, June CPI on Thursday is the week's main event for cable. A soft inflation number would cement the case for a July Fed cut and likely push sterling above $1.2800. A hot print would reverse the dollar's recent losses and test support at $1.2680.

For the euro, the focus is on the ECB's July meeting minutes, due Thursday. Any hint that the council discussed a September cut would weigh on the single currency further. The pound's 2026 high against the euro is now within striking distance of €0.8450, a level not tested since early 2022. A break above that would open the path toward €0.8500, a level that would require a sustained shift in the rate differential or a fresh catalyst from the eurozone side.

Traders are watching the EUR/GBP 0.8400 level as near-term support. A close below that would confirm the breakout from the range that held through most of June. UK GDP data lands Tuesday. US CPI follows Thursday.