Pound to Euro Tilts Lower

Modified: Tuesday, 3 March 2026 07:46 BST - Written by David Woodsmith

STORY LINK Pound to Euro Tilts Lower

The Pound to Euro (GBP/EUR) exchange rate struggled to establish a clear direction at the beginning of the week, with heightened geopolitical tensions keeping investors on edge.

At the time of writing, GBP/EUR hovered near €1.1429, showing little movement on Monday’s opening levels.

Sterling faced subdued trading conditions as markets reacted to the growing risk of disruption stemming from intensifying conflict in the Middle East.

Investor anxiety increased after coordinated US-led military action against Iran over the weekend resulted in the effective shutdown of the Strait of Hormuz, a vital shipping corridor responsible for transporting a significant share of global oil exports.

The prospect of supply disruption has fuelled expectations of higher energy costs worldwide. For the UK, which relies heavily on imported fuel, this raises concerns that inflationary pressures could re-emerge just as price growth had begun to ease.

Market participants fear that a renewed surge in oil and gas prices may complicate the Bank of England’s policy path, potentially forcing policymakers to balance slowing economic momentum against stubborn inflation risks.

The Euro also lacked momentum, with demand constrained by renewed strength in the US Dollar as investors gravitated toward safer assets amid geopolitical uncertainty.

Additional pressure followed the release of Germany’s latest retail sales data, which revealed a sharper-than-expected contraction in consumer spending early in the year, reinforcing concerns over the resilience of Europe’s largest economy.

Short-Term GBP/EUR Forecast: Eurozone Inflation Data in Focus

Attention now turns to the Eurozone’s upcoming inflation figures, which are expected to drive movement in the Pound to Euro exchange rate in the near term.

Preliminary data for February is forecast to show consumer price growth holding at around 1.7%, marking a prolonged period below the European Central Bank’s target level and potentially strengthening the case for a more accommodative policy stance.

Meanwhile, Sterling may remain directionless ahead of Chancellor Rachel Reeves’s Spring Statement, with traders hesitant to take firm positions until further clarity emerges regarding the UK’s fiscal outlook.

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TAGS: Pound Euro Forecasts