GBP/EUR exchange rate March review: pound pulled to nine-week low against euro
The pound was dragged lower by mounting Bank of England interest rate expectations in March.
1 March
The pound to euro (GBP/EUR) exchange rate traded sideways in the 1.16 range at the start of the month. Warmer-than-forecast Eurozone inflation data had little impact on this lateral movement, despite intensifying speculation that interest rates could remain higher for longer in the bloc to cool sicky inflation – a hawkish outlook that supported the single currency.
Headline Eurozone inflation eased to 2.6% in February’s annualised report, rather than dipping to 2.5% as forecast.
6 March
Chancellor Jeremy Hunt’s slew of tax cuts didn't spring any surprises on the pound in the Budget. The Office for Budget Responsibility’s (OBR) economic projections had more of an impact: it expects the economy to grow by 0.8% this year after falling into a recession and sees UK inflation dropping below the Bank of England’s (BoE) 2% target within a few months. The OBR’s outlook bolstered interest rate cut bets, denting the pound which dropped just below 1.17.
7 March
The pound touched a three-week high just above 1.17 against the euro as investors reacted to the European Central Bank’s (ECB) widely expected decision to keep interest rates steady in March. Despite remaining coy about future cuts, it revised its inflation forecasts lower, which ramped up June interest rate cut speculation, souring euro sentiment.
12 March
The pair found itself on the backfoot following the release of a downbeat UK jobs report that sparked BoE interest rate cut bets, causing it to dip below 1.17. Unemployment rose and wage growth eased in the three months to January as the UK labour market displayed signs of weakness, reflecting a broader slowdown in the economy.
13 March
The pound was flat despite signs of improving economic activity. UK GDP data for January printed in line with forecasts, showing 0.2% growth. This raised hopes that the UK will avoid a prolonged recession, with future months expected to show further improvements.
18 March
Consumer price data for February confirmed that headline inflation in the Eurozone is cooling towards the ECB’s 2% target. The euro managed to resist the downward pressure from subsequent interest rate cut speculation.
20 March
A sharp fall in UK inflation created headwinds for the pound as it appeared to pave the way for interest rate cuts this summer. The UK consumer price index (CPI) cooled more than forecast to 3.4%, the lowest since 2021.
21 March
As expected, the BoE held interest rates steady at 5.25% in March, leaving them unchanged for the fifth policy meeting in a row. It means borrowing costs remain at their highest level since 2008.
The central bank's Monetary Policy Committee voted 8-1 in favour of another hold - the first time since autumn 2021 that no member voted to hike rates. Their fading hawkish views increased policy-loosening expectations, which sullied the pound’s appeal.
22 March
The amount of goods purchased by British shoppers was unchanged between January and February following a 3.6% increase in the previous month. News of stagnating retail sales pulled the pound to a nine-week low against the euro, just above the 1.16 level.
28 March
The pound managed to shrug off confirmation that the UK economy went into recession at the end of last year. The latest GDP estimate showed it contracted in the last two quarters of 2023.
The pound to euro exchange rate ended the month just above the 1.17 benchmark.
Looking ahead
The next gathering of BoE rate-setters is scheduled for May. Economic data released from the UK economy in April will inform monetary policy forecasts – notably the consumer price index on 17 April.
The next ECB policy meeting is pencilled in for 11 April. The central bank is expected to leave interest rates untouched, before potentially em