Pound's Rally Against Euro Faces Major Technical Test

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Pound sterling's rise against the euro reaches a potential tripwire at 1.16.

It's been an unexpectedly fortuitous time for our readers who are looking to buy euros; the market's delivered a gain of 1.76% in a matter of 12 days, which is unusual for a pair that can be quite docile.

We've spoken to the dealing desk at Horizon Currency and are told that there's an abundance of order action up at 1.17, which tells us retail punters think this advance can continue.

And why not? The pros all said we should be closer to 1.11 at this stage of 2026, yet here we are as global events shake up previously-held assumptions about how the year would play out.

The one point of caution to consider is that the run-up to 1.16 could encounter some resistance, as two recent rallies have faded around 1.1595 this week.

Casting our eyes back to early February also reveals this area to have disabled the bulls: the pound-euro exchange rate turned tail here and trended lower through February to touch 1.1383:

The Relative Strength Index (RSI) - in the lower panel - has risen to 66-which is usually a bullish signal, but GBP/EUR is peculiar in that it's daily RSI tends not to rise much beyond here.

That's probably to do with that observation I made that this is usually a docile exchange rate.

In fact, an RSI at 64-65 usually marks the top of a rally (the last time it hit the overbought 70 level was in 2024!) as a pullback or consolidation envelops the pair.

Despite some signs of caution, the technical setup is still largely constructive and the geopolitical backdrop is also proving a tailwind, and further gains towards 1.17 are therefore possible.

"Against the euro, sterling has outperformed. The hawkish repricing in BoE expectations has been far more pronounced than the ECB’s, reinforcing GBP/EUR strength," says George Vessey, Lead FX & Macro Strategist at Convera.

So althogh the setup is constructive it's worth keeping in mind that some technical risks are evident, so covering some exposure here could be wise.