Where are exchange rates as we reach Easter? The war in Iran has certainly put a spoke in the wheel of central banks’ attempts to curb inflation and that’s had a knock effect on exchange rates. But for the dollar, it’s all about ‘safe-haven status’.
March ended with a familiar problem wearing a new costume. Energy prices surged again as the Iran conflict kept markets guessing about supply routes, and suddenly central banks were back in “wait and see” mode. Nobody wanted to promise rate cuts while petrol, shipping and household bills were all moving the wrong way
That matters for exchange rates because currencies don’t just trade on today’s numbers. They trade on what investors think interest rates will look like six months from now. When energy prices spike, inflation risks rise. But growth fears rise too. So you get stop-start moves: a burst one way, a pullback the next.
Over the past week, sterling has drifted lower against both the euro and the dollar, while the euro has been steadier against the dollar. In other words: it’s been more about “pound wobble” than a clean dollar run. The backdrop is still the same trio of drivers we’ve been living with all month — energy, central banks, and how nervous everyone feels on any given day.
What we’re watching now is whether the energy shock stays a headline issue or turns into a real inflation issue. If it feeds into wages and pricing decisions, central banks stay cautious for longer. If it fades quickly, rate-cut chatter returns just as fast.
GBP: Pound sinks to 4-week low
Sterling has slipped by just under a cent versus both the euro and the dollar over the week. The story isn’t panic. It’s repricing. The Bank of England kept rates unchanged in March and leaned heavily on the idea that higher energy costs could filter through the economy. That’s a less relaxed message than markets were getting comfortable with earlier in the year.
The pound’s next move is likely to hinge on whether UK data stays calm while energy stays hot. If inflation expectations pick up, sterling can find support from the “higher for longer” rate narrative. But if growth worries dominate, that support can feel flimsy.
GBP/EUR past year
EUR: Euro pulled both ways
The euro has been choppy, but it’s broadly held its ground against the dollar this week. The ECB also sat tight on rates and openly flagged how the Middle East conflict has made the outlook more uncertain — code for “we’re not rushing into the next move.”
Europe’s sensitivity to imported energy is the catch. Higher energy prices can lift the inflation prints, but they can also sap confidence in growth. That tug-of-war is why the euro can look resilient one moment and wobbly the next, even when the central bank sounds steady.
EUR/USD past year
USD: Safe-haven appeal returns – but it’s a jumpy version of “safe”
The dollar’s tone has been driven as much by nerves as by economics. The Fed kept rates unchanged and again highlighted elevated uncertainty tied to developments in the Middle East. In risk-off moments, the dollar tends to benefit simply because it’s still the world’s default place to park money when headlines get ugly.
But the push-pull is real. A big energy shock can make inflation look sticky, yet also raise recession fears. That’s when markets can swing between “rates stay high” and “cuts are back,” and the dollar can lurch with them.
USD/GBP past year
What’s coming up: key events to watch
Looking ahead, several important economic events could influence exchange rates over the next couple of weeks:
- USA, Non-Farm payrolls (3 April)
- USA, ISM Services PMI (6 April)
- USA, FOMC Minutes (8 April)
- EU, German Balance of Trade (9 April)
- USA, Quarterly GDP (9 April)
- USA, Inflation (10 April)
- UK, Inflation (15 April)
- UK, GDP (16 April)
How to protect your own budget
Exchange rates can shift quickly – and when you’re moving large sums for a property purchase, that can mean thousands gained or lost. Speak to a currency specialist to discuss tools like forward contracts, which let you lock in an exchange rate for the future, shielding your budget from adverse movements.
