Pound to Euro Near Three-Week Best

Modified: Wednesday, 4 March 2026 21:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Near Three-Week Best

The Pound Euro (GBP/EUR) exchange rate advanced to a three-week high on Wednesday as the fallout from the US and Israeli strikes on Iran continued to reverberate through global markets.

At the time of writing, GBP/EUR was trading at €1.1492, having pulled back slightly from an earlier peak of €1.1509.

The Euro came under pressure at the start of Wednesday’s European session as investors continued to weigh the economic and geopolitical consequences of the US-Israel strikes on Iran and the intensifying conflict in the Middle East.

The single currency was also undermined by fresh tensions between the EU and the US after President Donald Trump threatened to suspend all trade with Spain for refusing to grant the US access to its military bases.

Spanish Prime Minister Pedro Sánchez delivered a defiant response, while EU trade spokesperson Olof Gill signalled that Brussels could retaliate if necessary. Gill stated:

‘The Commission will ensure that the interests of the European Union are fully protected. We stand in full solidarity with all Member States and all its citizens and, through our common trade policy, stand ready to act if necessary to safeguard EU interests’.

Relations between the EU and US have remained strained during Trump’s second presidency, with disputes over tariffs and remarks about Greenland already souring diplomatic ties.

Despite the earlier pressure, the Euro later regained some ground after stronger-than-expected economic figures from the Eurozone. The bloc’s final services PMI was revised higher, while the unemployment rate unexpectedly dropped to a new record low of 6.1% in January.

The Pound traded without a clear trend as investors digested the UK’s final services PMI.

The index came in as expected, indicating solid activity in the sector despite a slight 0.1-point decline from the previous month.

However, the report presented a mixed picture. On one hand, the survey pointed to rising cost pressures, which could feed into inflation and encourage the Bank of England to keep interest rates higher for longer. On the other hand, it also showed service sector firms reducing their workforce, highlighting potential cracks in the labour market.

Short-Term GBP/EUR Forecast: Eurozone Retail Sales and ECB Signals in Focus

The Eurozone’s latest retail sales release could lend the Euro support. Economists expect sales to rebound in January, with growth forecast at 0.3% after a 0.5% decline in December.

Later in the day, investors will turn their attention to the European Central Bank’s latest policy meeting minutes, followed by a speech from ECB President Christine Lagarde. Should Lagarde warn that the Middle East crisis poses upside risks to inflation, the Euro may attract additional support.

However, concerns surrounding Europe’s energy security and escalating tensions between the EU and the US could weigh on the single currency and keep EUR movement volatile.

With little in the way of notable UK data, the Pound may lack a clear catalyst and struggle to establish a firm direction.

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TAGS: Pound Euro Forecasts