British Pound to Euro Forecast: Iran Ceasefire Eases Euro-Zone Growth Pressure

Modified: Wednesday, 8 April 2026 08:26 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: Iran Ceasefire Eases Euro-Zone Growth Pressure

The Pound to Euro (GBP/EUR) exchange rate found support below 1.1450 and moved higher to the 1.1475 area, with the Euro held back by ongoing growth concerns.

The pair also drew support from an improvement in global risk conditions after confirmation of a two-week ceasefire between the United States and Iran, easing immediate fears over energy prices and financial market disruption.

There was some relief in UK markets, with the 10-year gilt yield trading just below 4.80% while the FTSE 100 index edged higher.

The ceasefire agreement, brokered with Pakistan’s involvement, triggered a sharp market reaction, with oil prices falling strongly, global equities rallying and bond yields declining.

The shift in risk appetite helped underpin Sterling, while the Euro failed to secure significant support given underlying concerns over regional growth.

There are, however, still important doubts surrounding the durability of the agreement.

Iran has reportedly pushed for wide-ranging concessions, including sanctions relief, reconstruction compensation and control over the Strait of Hormuz, which will make a lasting settlement difficult.

Markets will therefore remain highly sensitive to any further developments.

Even with the easing in geopolitical tensions, investors continue to focus on the economic damage already inflicted by the recent surge in energy prices and heightened uncertainty.

ING expects further GBP/EUR losses to 1.1360, but added; “We are still a little worried that if the ECB does not hike on 30 April, even if energy prices remain high, the Euro will get hit.”

The latest business surveys suggested that both the UK and Euro-Zone economies have lost momentum.

The UK services PMI index retreated to 50.5 for March from 53.9 previously and below the flash reading of 51.2, with output prices rising at the fastest pace for 11 months and employment continuing to decline.

Tim Moore, Economics Director at S&P Global Market Intelligence, commented; “Rising global economic uncertainty due to the war in the Middle East contributed to a further decline in business optimism across the UK service economy. Confidence levels have fallen sharply after hitting a 15-month high in January.”

Euro-Zone data was also weak, reinforcing concerns that the region has been hit at least as hard as the UK.

The services PMI index dipped to a 10-month low of 50.2 from 51.9, while input costs increased at the fastest rate in over three years.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented; “The encouraging signs of growth seen earlier in the year have been eradicated thanks to surging energy prices, choked supply chains, financial market volatility and a renewed downturn in demand.”

The Euro-Zone Sentix investor confidence index also slumped sharply to -19.2 for April from -3.1 previously and below consensus forecasts.

According to Sentix; “Immediately following the outbreak of the Iran War, initial signs of uncertainty began to emerge in the first-mover index in early March. Just four weeks later, a massive slump has now followed.”

It added; “Investors are increasingly recognising that the risk of another recession is coming back into focus.”

The latest ceasefire developments have eased immediate pressure on financial markets, but underlying growth concerns remain an important restraint on the Euro.

GBP/EUR has moved further away from recent lows, although relative growth trends and central bank expectations will remain the key drivers in the near term.

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TAGS: Pound Euro Forecasts