British expats living across Portugal are waking up to stronger sterling and with it, a fresh set of financial questions.

The pound has gained solid ground against the euro this month, climbing to around €1.1913, its highest level in more than two years.

Behind the move is a cocktail of stronger-than-expected UK economic data, sticky inflation, and the Bank of England’s reluctance to cut interest rates as quickly as the European Central Bank.

On paper, that’s a boost for thousands of British nationals living in eurozone countries like Portugal, Spain and France.

It means pension payments go further, local grocery bills feel lighter, and cross-border cash transfers come with less friction.

However, financial experts are urging caution: this isn’t a moment to be complacent — it’s a moment to take control.

Jake McLaughlin, Executive Director at deVere Portugal, says too many expats view the exchange rate passively, reacting after the fact rather than planning ahead.

“There’s a misplaced sense of relief when sterling rises — as if it’s a bonus that just happens,” says McLaughlin.

“But that kind of thinking leaves people exposed when the pound inevitably turns the other way. And it will.”

The recent rally, while welcome for GBP earners spending in euros, doesn’t change the underlying volatility in currency markets. Sterling remains acutely sensitive to political noise, central bank pivots, and economic data surprises. For expats with UK income and euro-denominated expenses, that volatility has real-world consequences.

“Expats often underestimate how much their lifestyle is pegged to FX moves,” McLaughlin explains.

“A 3–4% shift in the pound against the euro can easily translate to a full month’s mortgage payment or wipe out the gains of a supposedly ‘safe’ pension drawdown strategy.”

In the past few years, Brexit, Covid, energy shocks and fiscal resets have reshaped the currency environment. There is no longer a reliable range or trend to count on. While this latest move has favoured the pound, few would bet against a reversal if rate cut expectations in the UK catch up to the ECB, or if political instability returns to Westminster.

McLaughlin urges British expats to treat FX risk as a central part of their financial planning, not an afterthought.

“If you’re living in euros but drawing income in pounds, that’s not a technical detail. That’s a currency exposure. And managing it well can make a six-figure difference over time.”

That management can take different forms. For some, it means shifting more assets into the eurozone by localising income and expenses to reduce vulnerability.

For others, it’s about timing transfers with the help of FX tools and advice, or even exploring hedging mechanisms that used to be the preserve of institutions but are now accessible to individuals.

At the heart of the issue is mindset. For years, many expats treated the FX rate as something to check occasionally, a small side note on their banking app.

But as McLaughlin puts it, “Sterling isn’t just a currency. For British expats, it’s a risk asset. And it should be treated like one.”

He says the days of assuming long-term parity are over. “We’re seeing clients become more intentional — structuring investments, pensions, and income strategies with FX performance in mind. That’s smart planning, not overcomplication.”

There’s also a broader strategic point. With UK fiscal policy still under pressure, and European politics entering a new, less predictable phase ahead of EU elections and national contests, currency markets are being driven by more than economics. For expats, that means even more incentive to protect against currency drift.

“This is a moment of opportunity,” says McLaughlin. “Sterling strength gives people a window to reassess. To move money smartly. To rebalance. But the window doesn’t stay open forever.”

The message appears to be to enjoy the upside, but don’t confuse it with stability. For UK expats, the pound’s strength is a reminder, not solely a reward.

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You can contact Jake with any questions here: jake.mclaughlin@devere-portugal.pt or the deVere Portugal Office +351 22 110 9071 or book a meeting with him here https://calendly.com/jake-mclaughlin/review

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