The exchange rate has jumped to €1.113, the highest level seen in eight weeks.
Sterling has been bolstered by an update from the Bank of England yesterday, after key policymakers voted on interest rates.
Only two of the nine members of the Monetary Policy Committee (MPC) voted to hike the rate from 0.25 to 0.5 per cent.
Bank of England chief economist Andy Haldane held off voting for a hike, with only Michael Saunders and Ian McCafferty calling for rates to rise.
Pound euro exchange rate: Sterling has jumped after an interest rate hike hint
But despite the rate remaining at its historic 0.25 low, minutes from the meeting hinted that a rate hike could come as soon as November.
The MPC said: “Some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target.
“All MPC members continue to judge that, if the economy follows a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations.”
A rate hike in the coming months would end a decade of record low interest rates.
Pound euro exchange rate: Sterling is buying €1.126
The pound rocketed higher after the latest Bank of England monetary policy announcements
Rewan Tremethick, currency analyst at TorFX, said: “The pound rocketed higher yesterday after the latest Bank of England monetary policy announcements.
“No immediate changes to policy were made, but the meeting minutes suggested stimulus could be withdrawn at a pace faster than markets are currently expecting.
“This unsurprisingly caused much excitement, sending the GBP/EUR exchange rate 1.2 per cent higher to €1.123 – the best level in eight weeks.”
It has been an encouraging week for the pound to euro exchange rate, which was earlier bolstered by positive data out of the UK.
Pound euro exchange rate: Sterling has enjoyed an encouraging week on the back of positive UK data
Sterling jumped due to soaring inflation in August as well as falling unemployment.
Inflation hit 2.9 per cent in August – well above the Bank’s target of two per cent.
Raising interest rates can help push inflation down – taking pressure off British households.
Unemployment has also reached a 42-year low, suggesting the economy remains strong – and wage rises may soon start to pick up.