Pound to Euro Flat as Inflation and ECB Signals Balance Out

Modified: Wednesday, 25 March 2026 21:32 BST - Written by David Woodsmith

STORY LINK Pound to Euro Flat as Inflation and ECB Signals Balance Out

The Pound Euro (GBP/EUR) exchange rate moved within a tight range on Wednesday, with Sterling recovering earlier losses, as investors weighed how the Middle East crisis could influence central bank policy paths.

At the time of writing, GBP/EUR was hovering around €1.1556, showing little overall movement on the day.

The Pound ticked higher on Wednesday morning, helping GBP/EUR recover its modest overnight losses, after the release of the UK’s latest consumer price index.

February’s figures showed headline inflation remained unchanged in line with expectations, while core inflation surprised to the upside, rising from 3.1% to 3.2%.

This provided Sterling with some support. Evidence of persistent underlying price pressures, even before the recent surge in energy costs linked to the US-Israel conflict with Iran, reinforced market expectations that the Bank of England could consider raising interest rates later this year if inflationary pressures continue to build.

The Euro traded in a narrow range, finding some support from remarks made by European Central Bank President Christine Lagarde.

Speaking at an event in Frankfurt, Lagarde suggested policymakers remain prepared to tighten monetary policy if required. While she stressed it was too early to act, she indicated that even a modest breach of the ECB’s 2% inflation goal could justify a rate increase.

However, gains in the single currency were limited by Germany’s latest business climate figures. Despite coming in above expectations, the index fell to its lowest level since February 2025, highlighting weakening sentiment as the ongoing Middle East conflict weighs on the outlook.

Short-Term GBP/EUR Forecast: German Confidence Data in Focus

Germany’s latest consumer confidence figures will be in focus. A marked deterioration in sentiment within the Eurozone’s largest economy, particularly against the backdrop of the Middle East crisis and rising inflationary pressures, could weigh on the Euro.

Beyond this, the economic calendar is relatively quiet, which may leave the Pound Euro exchange rate vulnerable to broader market dynamics.

GBP/EUR could see choppy and unpredictable movement, with shifts in risk appetite and developments in the Middle East likely to act as key catalysts.

The single currency may also take cues from its inverse relationship with the US Dollar, as updates on the Iran conflict and the latest US initial jobless claims data influence demand.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts