- Pound (GBP) is falling on Monday after gains last week
- UK sentiment fell to its lowest level in over a year
- Euro (EUR) is rising but gains could be short-lived
- The ECB is expected to leave rates unchanged this week
The Pound-Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.36% in the previous week, settling on Friday at €1.1585. The pair traded between €1.1492 and €1.16007. At 15:30 UTC on Monday, GBP/EUR trades -0.05% lower at €1.1581.
The pound is falling at the start of the week after data showed that UK consumer sentiment deteriorated to its lowest level since the start of last year following the outbreak of war in the Middle East.
According to the S&P Global Consumer Sentiment Index, morale dropped to 44.1 in March, down from 44.8 in February, marking the lowest level since January 2025.
The data provides the first concrete sign that the war in the Middle East may be starting to weigh on the UK economy.
The figures also come ahead of the Bank of England’s interest rate decision on Thursday. While the central bank is expected to leave interest rates unchanged at 3.75%, expectations had previously been for a 25-basis-point rate cut. However, this is no longer expected given the inflationary pressures that rising oil and energy prices could create.
The market will focus on the outlook from the BoE for clues on whether the central will cut rates at all this year or indeed whether it could hike rates.
The euro is edging higher against its major peers after recent weakness. However, gains could be short-lived given Europe’s vulnerability to higher oil and energy prices, given its reliance on imported energy.
Oil prices are edging slightly lower today, with Brent trading around $99 a barrel. However, prices are still up around 40% since the start of the conflict, while natural gas prices have risen by more than 55%.
The ECB is expected to look through these increases at its upcoming meeting, with no change in interest rates expected.
