GBP/EUR exchange rate week review: pound mixed versus euro as Middle East tensions, IMF warnings and EU optimism collide
Pound flirts with 1.15 against the euro as 13/04/2026 to 17/04/2026: UK-EU trade optimism and a dramatic oil price crash bookend a volatile week shaped by IMF growth warnings, central bank caution, and the reopening of the Strait of Hormuz.
Monday
The pound euro (GBP/EUR) exchange rate climbed to within touching distance of 1.15, buoyed by reported plans that facilitate closer alignment between the UK and the EU’s single market. The proposed arrangement would allow the UK to adopt new EU rules without a full parliamentary vote, a move that investors hope will ease trade friction with the bloc.
The euro was steady amid cautious optimism within the EU following Victor Orban’s defeat in Hungary’s general election. Peter Magyar, who succeeded him, has expressed his intention to enhance relations with the EU and lessen Hungary’s opposition to significant policy decisions.
Tuesday
The pound edged above the 1.15 benchmark against the euro even as forecasts for UK economic growth this year were revised significantly lower.
According to the International Monetary Fund (IMF), the UK is expected to be the hardest-hit G7 economy by the US-Iran conflict, with growth falling to 0.8%, down from a previous estimate of 1.3%.
The euro softened under pressure from risk-on conditions and comments from European Central Bank (ECB) President Christine Lagarde, who stressed the importance of a data-led approach to monetary policy. Her dovish remarks tempered expectations for interest rate hikes in the near term.
Wednesday
The pound traded sideways versus the euro as comments from Bank of England (BoE) Governor Andrew Bailey failed to alter policy expectations, with markets instead driven by improving sentiment around US-Iran talks.
Data showing Eurozone industrial production was sluggish ahead of the Middle East war weighed slightly on the single currency. Production in the bloc ticked up in February by just 0.4% compared to January, leaving levels below most of 2025. The surge in energy prices has put further pressure on energy-intensive industry.
Thursday
The pound weakened against the euro, despite official data showing the UK posted stronger-than-expected economic growth.
February’s GDP print revealed a 0.5% expansion, exceeding forecasts, but did not reduce BoE rate hike expectations.
The single currency was subdued following the International Energy Agency's (IEA) announcement that Europe possesses approximately six months of jet fuel reserves ahead of the crucial summer season.
Friday
The pound and euro were bolstered as oil prices crashed over 13% following the reopening of the Strait of Hormuz, prompting a powerful return of global risk appetite.
The pound found strong support as the threat of an energy-driven UK recession began to fade, while the single currency firmed as European growth concerns eased alongside falling gas prices.
The pound euro exchange rate ended the week around 1.148.
Looking ahead
The UK’s March CPI print, which hits the headlines on Wednesday, will shape expectations for the BoE’s April policy meeting. Markets will consider the impact of the Iran war and the likelihood that the central bank will leave rates untouched to prevent inflation from rising rapidly. The consensus is for headline UK inflation to rise to 3.4% from 3%. However, the core rate is anticipated to slip to 2.8% from 3.2%, which could keep hopes alive that the BoE will hold steady.