THE Pound has risen to a five-month high against the Euro as it also remains strong against the Dollar – but experts have warned it “isn’t a sign of a British economic miracle”.
It has been a great start to February for the Pound Sterling which is now €1.16 against the Euro – the highest since September 2025.
It is also doing well against the US Dollar, hitting $1.38 last week, which is the highest it’s been since October 2021.
It has since retreated slightly this week to $1.37.
Experts said the Euro is being affected by stagnant growth in Germany and France while investors are backing Britain over Europe because the European Central Bank (ECB) is cutting rates more aggressively than the Bank of England (BoE).
They said the BoE’s base rate decision on Thursday is a “pivot point” to see if the Pound could climb higher.
The Pound is currently in a sweet spot
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, explained why the Pound is doing well against the Euro.
He added: “The Pound is currently in a ‘sweet spot’, hitting a five-month high against the Euro on the back of ‘risk-on’ sentiment in the global markets and diverging central bank outlooks. As global stocks rally, investors favour the Pound over the Euro, which is currently weighed down by stagnant growth in Germany and France.
“Furthermore, the ECB’s lean toward aggressive rate cuts makes the Euro less attractive compared to Sterling’s higher yields. However, this rally is fragile. Sustainability depends on Thursday’s BoE decision. If the BoE maintains a ‘hawkish’ stance, as most market analysts expect and holds rates at 3.75%, emphasising inflation risks, the Pound could climb further.
“Conversely, if the Bank signals imminent cuts or expresses concern over UK growth, the ‘carry trade’ advantage will fade, likely pulling the Pound back. Thursday’s meeting is a pivot point that could either cement these gains or trigger a sharp correction.”
David Belle, Founder and Trader at Fink Money, said the Pound is rising because inflation expectations for the UK are going up.
He continued: “Sterling is rising due to inflation expectations for the UK rising from 3.6% to 3.8% from December to January. This implies that the BoE might have trouble on their hands considering they are looking at a cutting cycle into an extremely poor growth environment.
“The weighing up of growth versus inflation are the two factors they’re contending with due to the Labour government’s ineptitude across everything they do. Even Rishi Sunak has said Keir Starmer is making the same mistake he did when he was not focused on growth.”
It isn’t a sign of a British economic miracle
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said it was a “lack of disaster” rather than a successful strategy for the Pound.
He added: “Sterling’s five-month high isn’t a sign of a British economic miracle, it’s a ‘least-worst’ trophy. While the Eurozone stalls, the UK is benefiting from a cocktail of resilient data and a Bank of England far too terrified of ‘sticky’ inflation to follow the global trend of aggressive rate cuts.
“In our AI audits of professional services firms, we see a parallel. Companies often mistake a momentary lack of disaster for a successful strategy. Just as firms bolt on AI without fixing underlying processes, the UK is leaning on high rates to prop up the Pound rather than addressing the structural productivity issues that drive long-term value. Thursday’s decision is priced in.
“The real test is whether the BoE admits that high rates are a blunt instrument doing more harm to small/medium enterprises (SMEs) than good for the currency. If they signal ‘higher for longer’, the Pound might hold, but we’re choosing currency vanity over growth. Is a strong Pound worth it if the economy is just running to stand still?”
Photo by Leo Roberts on Unsplash.
