- Pound (GBP) is rising after gains last week
- US-Iran peace talks collapse
- Euro (EUR) is falling but rises versus the USD
- Deutsche Bank cuts German growth forecast
The Pound-Euro (GBP/EUR) exchange rate is rising after gains last week. The pair rose 0.27% in the previous week, settling on Friday at €1.1487. The pair traded between €1.1439 and €1.1515. At 17:30 UTC on Monday, GBP/EUR trades +0.05% at €1.1476.
The pound is rising against the euro as market sentiment improves after a weak start to the week, with investors continuing to assess developments in the Middle East.
While peace talks over the weekend collapsed, prompting a strong reaction from President Donald Trump — including the launch of a naval blockade on Iranian ports — oil prices initially surged. However, crude has since eased, helping to stabilise broader market sentiment, amid reports that Iran may be open to ending its uranium enrichment programme.
Despite the recent pullback in oil prices, earlier price strength has reinforced expectations that the Bank of England could raise interest rates once, or even twice, this year. That said, Governor Andrew Bailey has warned that markets may be getting ahead of themselves in pricing a more hawkish policy path.
Meanwhile, survey data from Deloitte showed confidence among the UK’s largest companies has fallen to its lowest level since the pandemic, reflecting concerns over rising energy costs and higher borrowing rates.
The euro is weakening against the pound but gaining versus the U.S. dollar as overall risk sentiment improves. However, concerns are growing that the recovery in Germany — the eurozone’s largest economy — is being delayed by higher energy prices and ongoing geopolitical uncertainty.
Deutsche Bank has cut its 2026 growth forecast for Germany to 1%, while maintaining its 2027 projection at 1.5%, and expects inflation to average 2.7% this year.
Looking ahead, attention will turn to German wholesale price data and Spanish inflation figures, while later in the week the European Central Bank meeting minutes could provide further insight into the outlook for monetary policy.