GBP/EUR exchange rate week review: pound hit two-week high versus euro after BoE holds interest rates steady
Policymakers' decision to leave UK interest rates unchanged gave the pound a shot in the arm, lifting it to a two-week high against the euro.
Monday
The pound euro (GBP/EUR) exchange rate softened slightly after the Organisation for Economic Co-operation and Development (OECD) downgraded its 2025 UK growth forecast.
According to the OECD, the UK economy will grow only 1.4% this year, significantly down from the 1.7% previously expected, as the impact of Donald Trump's trade tariffs take effect.
The gloomy outlook stoked speculation that UK Finance Minister Rachel Reeves may outline spending cuts in next week’s Budget.
The single currency was supported by cautious optimism over potential Ukraine peace talks between the US and Russia, together with its negative trading relationship with a weakening dollar.
Tuesday
The pound traded sideways through the €1.18 range against the euro amid a lack of UK economic data.
The euro was supported by Germany’s ZEW economic sentiment index which accelerated to its highest level in more than five years. Morale among German investors improved more than expected this month, with the index increasing to 51.6 points from 26.0 points in February – exceeding an expected a reading of 50.3. However, the single currency’s gains were capped by a rebounding dollar.
Wednesday
The pound edged above the €1.19 benchmark ahead of the Bank of England’s (BoE) latest interest rate decision, with the central bank widely expected to hold interest rates steady.
The euro was undermined by the lack of progress in peace talks between Donald Trump and Vladimir Putin, with the Russian President refusing to accept US President’s ceasefire proposal.
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Thursday
The pound experienced a BoE-fuelled bounce after the central bank held UK interest rates at 4.5% in March. Despite rising to a two-week high around €1.997, the UK currency’s gains were capped by uncertainty over the policy outlook amid factors that could cause inflation to spiral, including higher wages and prices.
BoE rate-setters said they were also contending with an increasingly uncertain global outlook.
In the meeting minutes the BoE said: “Since the MPC's previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded. Other geopolitical uncertainties have also increased, and indicators of financial market volatility have risen globally.”
The euro waned due to its negative correlation with a buoyant dollar and receding hopes for a peace deal in Ukraine.
Friday
The pound traded sideways through the €1.19 mid-range against the euro amid mixed macroeconomic data.
British consumer morale improved for a second straight month in March, hitting a three-month high as people became slightly more optimistic about the economic outlook, but less so over their own finances.
Meanwhile, Eurozone consumer confidence fell more than expected in March as looming US trade tariffs raised concerns over economic momentum and inflation.
The pound euro exchange rate ended the week at around €1.193.
Looking ahead
A flurry of influential data from both sides includes the UK consumer price index (CPI) on Wednesday.
The CPI was 3% in the year to January 2025, up from 2.5% in the 12 months to December. If inflation remains stubborn, the BoE is likely to maintain its cautious approach to policy loosening, which could support the pound.
However, this could be overshadowed by the Spring Budget the same day. The UK growth forecast is set for a major downgrade and Rachel Reeves could unveil the biggest spending squeeze on Whitehall in years to boost growth.