- Pound (GBP) is falling but rises across the week
- Oil prices fell 10% tis week
- Euro (EUR) is rising after German inflation jumped
- German inflation rose to 2.8% YoY
The Pound-Euro (GBP/EUR) exchange rate is falling after two days of gains. The pair fell 0.02% in the previous session, settling on Thursday at €1.1487. The pair traded between €1.1475 and €1.1515. At 11:30 UTC on Friday, GBP/EUR trades -0.09% at €1.1476. The pair is set to rise 0.1% across the week.
The pound is weakening against the euro on Friday as investors continue to monitor developments in the Middle East.
Tehran has threatened to pull out of planned peace talks this weekend as Israel continues its strikes in Lebanon. Meanwhile, President Donald Trump has criticised Iran’s handling of the Strait of Hormuz, which remains largely closed.
Even so, oil prices are set to post a roughly 10% decline over the week, which is supportive for the UK given its reliance on imported energy. If oil prices continue to fall, this could ease inflationary pressure and reduce the need for the Bank of England to tighten policy further, particularly as growth slows and the labour market softens.
The euro, meanwhile, is gaining support after German inflation rose to 2.8% year-on-year in March, up from 1.9% in February — the highest level in over two years. The increase has been driven largely by energy costs, with petrol and heating oil prices rising sharply since the start of the Iran conflict.
Energy prices are now 7.2% higher year-on-year — the first increase since December 2023 — with motor fuels up 20% and heating oil surging 44.4%. Core inflation, which excludes food and energy, remains steady at 2.5%, unchanged since the start of the year.
This dynamic could lend further support to the euro, as the European Central Bank may be more inclined to keep policy tighter compared to the Bank of England, which had been moving closer to rate cuts prior to the recent surge in energy prices.
