Conflict in the Middle East continues to ripple through currency markets, with oil price swings driving rate expectations and keeping volatility elevated. This week sees central bank meetings from the Fed, BoE and ECB, all unlikely to deliver any interest rate changes.
Still, markets will be watching the rhetoric around inflation uncertainty closely. The dollar remains well supported by safe-haven demand, while both sterling and the euro face headwinds from rising energy costs and deteriorating terms of trade. Read on for more.
Current FX rates: 16 March 2026
| Currency pair | Rate |
|---|---|
| gbp usd | 1.3283 |
| eur usd | 1.1478 |
| gbp eur | 1.1574 |
Rates correct as of 12:50pm on Monday 16 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.
GBP/USD treads water amid oil swings and rate uncertainty
GBP/USD traded in a tight range this week, with the dollar supported by safe-haven flows and sterling finding some footing from the removal of expected rate cuts. Wild swings in oil prices are driving rate expectations, pushing any central bank action into the second half of this year. Neither the BoE nor Fed are expected to move this week, but rhetoric around inflation uncertainty is still key.
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Euro under pressure as energy costs and dollar strength take their toll
EUR/USD continued its move lower last week, hit by safe-haven dollar demand, rising eurozone energy costs and technical selling after the 1.15 level gave way. A “terms of trade” shock is now a central concern. Europe is paying more for energy imports without a matching rise in export prices, effectively eroding the bloc’s purchasing power. Any bounces in the pair may be short-lived unless conditions in the Middle East shift meaningfully. The ECB also meets this week with no rate change expected.
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Sterling’s gains against the euro look hard to sustain
Both currencies are feeling the impact of rising energy costs tied to the Iran conflict, but sterling looks more exposed. While the removal of UK rate cut expectations gave GBP/EUR a lift, that move now appears priced in. The UK’s fiscal position adds further pressure; rising Gilt yields, the cost of shielding consumers from energy prices, and the risk of an inflationary shock all weigh on sterling. On the euro side, markets are now pricing in at least one ECB hike by mid-summer.
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Looking forward
Key dates for your calendar.
- Monday: NY Empire State Manufacturing Index. Canada inflation rate.
- Tuesday: RBA meeting. ZEW economic sentiment. Japan balance of trade
- Wednesday: Fed interest rate decision. Bank of Canada also meeting. US reports PPI.
- Thursday: ECB, BOE and BOJ interest rate decisions (expectation across all is rates unchanged). UK unemployment rate.
What we’re talking to our clients about
We’re always here to support. Here are some of the conversations we’re having:
- Middle East conflict and FX impact
- Interest rate change likelihood
- US AI dominance pulling in USD inflows
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.