Hawkish central bank rhetoric dominated last week, with both the BoE and ECB firmly focused on inflation risks tied to the ongoing Iran conflict and volatile energy markets. Rate hike expectations have surged but time will tell, whether markets have overreacted. The dollar, meanwhile, sits in an unusual position: supported by safe-haven flows but held back by a comparatively less hawkish Fed. Read on for more.
Current FX rates: 23 March 2026
| Currency pair | Rate |
|---|---|
| gbp usd | 1.3379 |
| eur usd | 1.1581 |
| gbp eur | 1.1555 |
Rates correct as of 11:35pm on Monday 23 March but may now have changed.
The Big 3
A deeper look at the performance of major currency pairs this week. Become a subscriber to receive the full reports.
Rate hike expectations reshape sterling’s outlook
GBP/USD was notably more volatile last week, with sterling staging a sharp rally after the BoE held rates and delivered a firmly inflation-focused message. Markets responded swiftly, not only removing all expected cuts, but now pricing in more than two hikes this year. Political risk does still add some longer-term uncertainty for sterling. The dollar, by contrast, looked comparatively dovish, with the Fed’s dual mandate making it less likely to hike on inflation alone. UK PMI and inflation data will be closely watched this week.
ECB signals and safe haven demand pull EUR/USD in both directions
EUR/USD had a choppy week as both currencies faced competing forces. The ECB held rates but struck a hawkish tone, revising inflation projections up by 0.7%. Expectations of further rate hikes may prove an overreaction given downside growth risks. The dollar, meanwhile, is caught between safe-haven appeal and a comparatively less hawkish Fed, who will be impacted by a weaker labour market. PMI data and a Lagarde speech are in focus this week, but the Middle East remains the dominant variable.
Sterling falters against the euro as economic reality bites
Both central banks held rates and flagged inflation risks, but the BoE’s unanimously hawkish stance was the bigger surprise, with further hikes this year priced in. Yet sterling couldn’t capitalise against the euro. With weak growth and labour market slack, rate hikes would be a headwind rather than a tailwind for the UK economy.
Political uncertainty around potential leadership challenges adds a longer-term concern. On the euro side, the hawkish ECB shift was less of a shock given hikes were already partially expected. If market repricing proves overdone, the euro looks well placed to gain ground against sterling over the medium term.
Looking forward
Key dates for your calendar.
- Monday: Japan CPI.
- Tuesday: HCOB Manufacturing PMI. UK and US Manufacturing and Services PMI.
- Wednesday: The UK and Australia report CPI. Eurozone (Ifo) Business Climate. Lagarde speech.
- Thursday: The OECD interim economic outlook. GfK Consumer Confidence. US Unemployment Claims
- Friday: UK Retail Sales. Eurozone reports inflation expectations.
What we’re talking to our clients about
IFX Payments is service led. Here are some of the conversations we’re having:
- Oil costs and impact
- British stagflation and fiscal restraints
- High interest rate/lowering GBP paradox
The contents of this article do not constitute financial advice and are provided for general information purposes only. While the content is based on information believed to be accurate at the time of publication, no guarantee is provided.