This morning Andy Burnham enters Downing Street as the UK’s seventh Prime Minister in a decade. He has promised to place the cost of living crisis front and centre of government and will face immediate questions about his economic plans. Markets have largely priced in his arrival, but this week will be the first real test of how investors respond to him in office. His choice of Cabinet and any early signals on spending will be closely watched.
Looking further ahead, Thursday’s European Central Bank decision is the most significant event of the week for anyone with a euro transfer on the horizon. The ECB is widely expected to hold interest rates steady, but its tone on what comes next will be what moves markets.
Latest market insights:
Pound to euro:
Sterling is holding near a one-year high
- The pound has had a strong few weeks against the euro, up around 3% from its 2026 low in March, and is currently trading near its best level in over a year. Two things are supporting it. First, the Bank of England is expected to raise interest rates later this year, which makes holding pounds attractive to investors. Second, eurozone inflation fell to 2.8% in June, reducing the pressure on the ECB to keep raising rates, which has softened the euro.
- This week’s UK jobs data on Tuesday and UK inflation figures on Wednesday are both important. Strong numbers would reinforce the case for a Bank of England rate rise and could push the pound higher still. Weaker numbers could take some steam out of the recent rally.
- For property buyers, a 1% move against you on a 400,000 euro purchase equals 4,000 euros straight off your budget. With sterling near a one-year high, now could be a good moment to buy currency, or at least lock in a rate you’re happy with for a future transfer.
US dollar to euro:
The dollar remains firm but faces a big test on Thursday
- The dollar has held onto most of its recent gains, supported by the Federal Reserve’s cautious stance on interest rates. However, Thursday’s ECB decision could shift the picture. If the ECB signals that further rate rises are coming later this year, the euro could strengthen and the dollar could come under pressure. If the ECB strikes a more cautious tone, the dollar is likely to stay firm.
Pound to US dollar:
Sterling has recovered around 2% against the dollar since its June low
- The pound has clawed back ground against the dollar over the past few weeks, helped by improving UK data and rising expectations of a Bank of England rate rise. Burnham’s arrival in Downing Street this morning is likely to keep sterling in focus. Any early signals that suggest a looser approach to public spending than markets are expecting could weigh on the pound quickly.
What to watch this week:
Tuesday 21 July:
- UK jobs data published. A strong reading supports the case for a Bank of England rate rise and could lift sterling against both the euro and the dollar.
Wednesday 22 July:
- UK inflation figures for June. This is one of the most important releases of the week for GBP to EUR. Hot inflation keeps pressure on the Bank of England to raise rates, which supports the pound. A softer reading could ease some of sterling’s recent gains.
Thursday 23 July:
- ECB interest rate decision. The ECB is expected to hold rates steady, but the tone of the press conference will be the thing to watch. Any signal of further tightening later in the year could support the euro and put some pressure on GBP to EUR.
Middle East:
- Diplomatic efforts are continuing but the situation remains fragile. Any fresh escalation would likely push oil prices higher and add pressure on central banks, which could move all three pairs quickly.
If you have an international transfer coming up in the next few weeks or months, for a property purchase, a pension payment, supporting family abroad, or any other reason, the events of this week are a useful reminder that exchange rates can move quickly, and not always in the direction you’d hope.
The good news is that you don’t have to simply wait and see what happens. Speaking with a currency specialist costs nothing and carries no obligation. They can talk you through your options, including spot contracts for transfers you need to make now, and forward contracts for transfers you’re planning further ahead, and help you understand how today’s rate movements might affect your specific situation.
Contact Lumon on +44 (0)204 506 5672 for a free, no-obligation conversation and discover what options you have available to help.
