Pound to Euro Steady

Modified: Thursday, 5 March 2026 20:46 BST - Written by David Woodsmith

STORY LINK Pound to Euro Steady

The Pound to Euro (GBP/EUR) exchange rate moved within a narrow range on Thursday as markets remained preoccupied with developments in the Middle East.

At the time of writing, GBP/EUR was trading close to €1.1491, largely unchanged compared with the beginning of Thursday’s session.

Sterling showed little clear direction as investors reassessed expectations for the Bank of England’s next interest rate move.

Only days ago, markets were widely convinced the central bank would deliver a rate cut in March, with pricing implying a probability of more than 80% for a 25 basis point reduction.

However, the sharp rise in global energy prices since tensions escalated in the Middle East has forced traders to reconsider that view. With inflation risks climbing, the likelihood of a near-term rate cut has dropped dramatically, with markets now placing the probability closer to 20%.

Speculation has therefore shifted toward when the Bank of England might resume easing. Some analysts expect policymakers to act as soon as April, while others believe cuts may be postponed until later in the year.

Although a delay in rate reductions would normally be supportive for the Pound, the underlying reason, mounting energy costs, has also sparked fresh worries about the impact on the UK’s economic outlook.

The Euro also struggled to find momentum, with the single currency facing its own challenges from rising energy prices across Europe.

Higher oil and gas costs have unsettled EUR investors as they threaten to complicate the European Central Bank’s efforts to bring inflation fully under control.

At the same time, the Eurozone’s latest retail sales report added to the cautious mood. The data showed an unexpected fall in consumer spending at the start of 2026, raising concerns that household demand across the bloc may be softening.

Short-Term GBP/EUR Forecast: Energy Markets Remain the Key Driver

There is little major economic data scheduled that is likely to have a decisive impact on the Pound to Euro exchange rate, aside from a possible revision to Eurozone GDP for the final quarter of 2025.

In the absence of strong economic catalysts, broader market sentiment is expected to play the dominant role in directing GBP/EUR movement.

Both currencies are likely to remain sensitive to headlines surrounding the Strait of Hormuz, particularly if disruption to shipping routes continues to influence oil and gas prices across Europe and the UK.

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TAGS: Pound Euro Forecasts