The risk of your exchange rate weakening in summer can be a cloud in an otherwise cloudless sky. See why some analysts suggest particular risks for the pound in the summer of 2026, and what recent history shows us.
For anyone watching exchange rates over the past year, one thing stands out: not much has happened.
Since last summer, sterling has spent much of its time moving sideways against both the euro and the US dollar. There have been periods of strength and weakness, but compared with some of the dramatic swings of recent years, the pound has been remarkably stable.
That stability can make it easy to forget how quickly things can change.
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Last year is a good example. Between the end of May and the end of July 2025, GBP/EUR fell by around 5%, dropping from close to €1.20 to around €1.14. For anyone planning an expensive family vacation in the school summer holidays, it was particularly unfortunate timing. Many families were finalising overseas purchases, paying tuition fees, funding retirements abroad or simply transferring larger sums for travel and lifestyle spending just as the pound was losing ground.
The question for anyone in a similar position today is whether something similar could happen again.
GBP/EUR past year
Could sterling face another summer sell-off?
There are certainly reasons why some analysts are cautious.
The UK economy continues to face challenges, including sluggish growth, pressure on public finances and ongoing questions about productivity. Political uncertainty is also beginning to re-emerge. Although the next general election remains some way off, speculation has already started about the future direction of the government and the possibility of a more interventionist, left-leaning leadership emerging at Number 10 in the years ahead.
Currency markets tend to dislike uncertainty more than almost anything else.
However, politics alone rarely explains exchange rate movements. Sterling’s performance against the euro, dollar and other major currencies is ultimately driven by a combination of interest rates, economic growth, investor confidence and capital flows.
What makes the current situation particularly interesting is that there may also be a seasonal pattern at work.
Does sterling often weaken during the summer?
Many currency market participants have noticed a recurring tendency for sterling to perform relatively well during the spring before losing momentum during the summer months.
The pattern is far from perfect, but there are enough examples to make it difficult to ignore.
In 2016, sterling held up reasonably well during the spring before suffering a dramatic decline following the Brexit referendum in June.
The Brexit vote weakened GBP/EUR by around 15%
In 2017, the pound strengthened as markets anticipated a strong Conservative victory in the snap general election. When that expectation proved wrong and Theresa May lost her parliamentary majority, GBP/EUR fell sharply through June and July.
In 2021, sterling entered the summer supported by optimism around the UK’s economic reopening, before weakening as concerns about the Delta variant and global growth returned.
Most recently, in 2025, GBP/EUR reached its yearly high at the beginning of July before suffering its worst monthly performance in nearly two years as markets shifted towards expecting further Bank of England rate cuts.
Not every year follows the pattern.
Even in years that don’t fit the pattern exactly, such as 2022, sterling’s most significant weakness often arrived during the second half of the summer. In that case, political instability and the fallout from the mini-Budget pushed the pound sharply lower between July and September.
GBP/USD before and after Liz Truss
2023 was quite different. Sterling continued strengthening through the summer as UK inflation remained stubbornly high and traders priced in more interest rate increases from the Bank of England.
In 2024, the pound also performed strongly between May and July, helped by political stability in the UK and expectations of European Central Bank rate cuts.
These exceptions are important. Exchange rates are not governed by seasonal rules in the same way as weather forecasts. Nevertheless, the repeated appearance of spring strength followed by summer weakness raises an obvious question: why does it happen so often?
Why might sterling weaken after May?
One possible explanation comes from a well-known investing adage: “Sell in May and go away.”
The saying refers to a long-observed pattern in stock markets, where returns between May and October have historically been weaker than those generated during the winter months. While the effect is far from guaranteed, it has appeared often enough across different markets to become one of the best-known seasonal trends in finance.
The FTSE 100 has frequently followed a similar pattern. Historically, UK equities have tended to experience a summer lull, often underperforming major international indices such as the S&P 500 between May and October.
This matters because sterling and UK financial markets often move in tandem. When international investors are increasing their exposure to UK assets, they typically need to buy pounds. Conversely, when enthusiasm for UK equities fades or capital flows elsewhere, some of that support for sterling can diminish.
The UK tax year effect
There may also be a uniquely British element to the story. The start of the new tax year in April brings a wave of ISA contributions, pension investments and portfolio rebalancing. These flows can provide support for both UK equities and sterling during the spring, but their influence tends to fade as summer progresses.
Taken together, this creates a plausible sequence: strong investment flows during April and May help support UK assets and the pound, before attention shifts back to the bigger drivers of exchange rates such as interest rates, economic growth and political risk.
Of course, seasonality is only one piece of the puzzle. The pound’s biggest summer declines have usually required a catalyst, whether that was the Brexit referendum in 2016, the snap election in 2017 or changing interest-rate expectations in 2025. But if sterling does have a tendency to lose momentum during the summer months, the same forces behind the “sell in May and go away” phenomenon may be part of the explanation.
What does the wider market suggest?
Looking beyond GBP/EUR, there are signs that sterling’s recent strength may already be facing challenges.
Against the US dollar, the pound remains heavily influenced by the relative interest rate outlook between the Bank of England and the Federal Reserve. Any sign that US rates will remain higher for longer could strengthen the dollar and put pressure on GBP/USD.
The broader trade-weighted pound index, which measures sterling against a basket of major currencies, has also spent much of the past year near multi-year highs. Historically, periods when sterling becomes expensive relative to its long-term average can make it more vulnerable to disappointments.
This does not mean the pound is about to collapse. However, it does mean expectations are already relatively optimistic. When expectations are high, it takes less bad news to trigger a correction.
What could this mean for your finances?
For anyone transferring money internationally, even modest exchange rate movements can have a significant impact.
A 5% move in GBP/EUR may not sound dramatic, but on a property purchase of €200,000 it can mean a difference of more than £10,000.
That matters whether you are:
- buying property overseas
- paying international school or university fees
- supporting family members abroad
- moving overseas
- repatriating overseas income
- managing investments across multiple countries
- transferring business funds internationally
The risk is not limited to those buying euros. Anyone exposed to foreign currencies should be aware that exchange rates can move quickly when market sentiment changes.
Should you act now?
No one knows whether sterling will repeat last year’s performance. The pound may continue strengthening. The eurozone could face fresh economic challenges. The Federal Reserve under its new chairman could cut interest rates as President Trump has demanded. Political risks in the UK may fail to materialise – especially if Andy Burnham loses the Makerfield by-election.
But history suggests that periods of apparent calm can end abruptly.
For those selling pounds and needing certainty over a future transfer, a forward contract may be worth considering. It allows you to secure an exchange rate now for a transfer that will take place later, helping to protect your budget from unexpected market moves.
For those buying pounds, maybe selling a property overseas, periods of weakness can create opportunities. Market orders allow you to target a specific exchange rate and automatically buy if that level becomes available, even if the market only reaches it briefly.
The key point is that exchange rates are rarely predictable. What can be controlled is how prepared you are when the market moves.
After a year of relative stability, and with history suggesting summer can be a challenging period for sterling, it may be worth paying closer attention than usual over the months ahead.
FAQs
Does sterling usually fall during the summer?
Not always, but there have been several years where sterling strengthened during the spring before weakening between June and August. Examples include 2016, 2017, 2021 and 2025. However, there have also been notable exceptions such as 2023 and 2024.
Why does the UK tax year matter for sterling?
The UK tax year ends on 5 April, which can trigger pension contributions, ISA investments and portfolio rebalancing. These financial flows may increase demand for sterling during April and May, potentially providing temporary support for the currency.
How can I protect myself against exchange rate volatility?
Tools such as forward contracts and market orders can help reduce uncertainty. A forward contract allows you to secure a rate for a future transfer, while a market order allows you to target a specific exchange rate and automatically trade if it becomes available.
