The pound rose to a one-year high against the euro yesterday in a boost for UK holidaymakers ahead of the summer break.

Sterling soared by more than half a cent versus the single currency to €1.1668, its highest since the start of July 2025.

That is despite fears in the City about a lurch to the Left if Andy Burnham becomes prime minister, which some fear could put the pound under pressure.

Comments by Bank of England Governor Andrew Bailey at a gathering of central bankers in Portugal are likely to have bolstered the currency yesterday, when he said that while the UK economy was ‘softening’ there was no imminent prospect of an interest rate cut.

He said: ‘That was off the table in March and is off the table at the moment,’ adding that the concern is inflation and that ‘we don’t want it to become embedded’. 

Yesterday’s gains come after the pound rose 1.4 per cent against the euro in the April-June period, its strongest quarter for nearly two years.

Sterling was just under €1.15 at the start of 2026 but against the dollar it has dropped from nearly $1.39 in January to less than $1.33 yesterday.

But its rise versus the euro is a boon for Britons planning a European holiday.

It has picked up by nearly three cents since its low point in February when £200 in spending money would have translated to €227. Today that would be worth €233.

Sarah Coles, head of personal finance at AJ Bell, said: ‘This is good news for holidaymakers heading to Europe, because their pound will go further.’

Yesterday’s euro weakness came after a fall in inflation in the single currency zone to 2.8 per cent in June – down from 3.2 per cent in May and lower than the 3 per cent expected by economists.

That eased pressure on the European Central Bank (ECB) to raise interest rates, with rate-setters signalling a split on whether further hikes were needed. 

In Britain, markets expect one rate rise this year – down from the four pencilled in at the height of the Iran war.

Matthew Ryan, head of market strategy at foreign exchange specialists Ebury, said the pound ‘remains remarkably resilient to both the prospect of a change in the political status quo and the shift to the Left under a more fiscally expansive Andy Burnham government’.

Many fear a Burnham government could herald higher borrowing, piling pressure on sterling and Government bonds.

Kathleen Brooks, research director at XTB, said the Portugal meeting had seen a ‘less hawkish’ tone from ECB chief Christine Lagarde than of late.