Monthly Currency Report Summary – March 2026

Overview

March was dominated by a sharp shift in market sentiment after the conflict in the Middle East escalated. What had previously been a more straightforward discussion around central bank policy quickly became a wider reassessment of inflation risk, energy prices, and safe-haven demand. The US Dollar regained support through much of the month as markets reacted to geopolitical uncertainty, while both Sterling and the Euro were forced to trade around the consequences of higher oil prices and the inflation risks that follow.

For Sterling, the month brought a major change in expectations. At the start of March, markets were still thinking mainly about whether the Bank of England might cut rates in the near term. As the month progressed and energy prices surged, that view changed. Traders began to question whether rate cuts would be possible at all in the short term if imported inflation pushed UK prices higher again. This helped Sterling recover from some of its early-month weakness, but gains were limited by the broader strength of the Dollar and by continued concerns over UK growth.

The Euro faced a similar challenge. On one side, higher energy prices created inflation risk for the Eurozone and encouraged talk that the ECB may have to stay more hawkish than previously expected. On the other, the Euro remained under pressure because the Dollar regained safe-haven appeal and because the region is highly exposed to energy supply concerns. As a result, EUR/USD traded defensively for much of the month, only showing more stable footing later on when the market began to question how durable the Dollar’s recovery really was.

GBP/EUR was more stable than the two major USD pairs but still volatile in shorter bursts. The pair was heavily influenced by shifts in relative performance between GBP/USD and EUR/USD, rather than by strong domestic catalysts from the UK or the Eurozone. It spent much of the month moving within a relatively narrow range, with traders reluctant to commit to a clear direction ahead of monetary policy signals from both the BoE and the ECB.

By the end of March, markets were no longer focused purely on growth and interest rate cuts. Instead, the dominant question had become whether central banks would have to hold a tighter stance for longer because of conflict-driven inflation risks. That left the Dollar supported, but not unchallenged, and set up a more uncertain backdrop for April.

GBP/USD

GBP/USD had a difficult but eventful month. It began March under pressure after the US strike on Iran triggered a broad safe-haven move into the Dollar. Sterling came under immediate selling pressure, and the pair dropped away from the higher levels seen at the end of February. In the opening days of the month, GBP/USD moved down toward the low 1.3300s, with traders focusing less on UK data and more on the geopolitical backdrop and the resulting jump in oil prices.

This early decline reflected two concerns. First, the Dollar was benefiting from its traditional safe-haven role. Second, the UK outlook became more complicated as higher energy prices raised the risk of inflation returning later in the year. That put the Bank of England in a difficult position. Markets had been leaning toward cuts, but the new inflation risk meant that assumption suddenly looked less secure.

Sterling did manage to recover from its initial losses. After falling close to 1.3250, the pair rebounded back toward the 1.3350 to 1.3400 region as traders took profit on the Dollar and reassessed whether the market had moved too aggressively. Technical signals also helped, with repeated references to the RSI suggesting that downside had become stretched in the short term.

Through the middle of the month, GBP/USD tried to build a more stable base. It moved back above 1.3400 on several occasions and even challenged the 1.3450 to 1.3500 area. However, each rally faced resistance. The market remained wary of overcommitting to Sterling because UK growth data stayed weak and labour market concerns continued to hang over the pound. Even where UK GDP met expectations or inflation came in at forecast, that was not enough to generate a strong bullish shift.

A more important change came from monetary policy expectations. Early in March, markets were still considering the possibility of BoE easing. By mid-month, that narrative had become less clear. The BoE held rates at 3.75%, and the tone after the decision was more cautious and hawkish than expected. Traders took the view that the Bank could not move too quickly on cuts while energy-driven inflation pressures remained a threat. That helped Sterling stabilise and pushed GBP/USD back toward the mid-1.3400s.

Later in the month, the pair became increasingly headline-driven. Comments from Trump about Iran, shipping routes, and the Strait of Hormuz repeatedly moved the Dollar and created uncertainty around energy supply. Cable reacted sharply to these shifts, but without developing a clear trend. It briefly traded as low as 1.3257, then recovered again toward 1.3500, only to drift back toward 1.3400 as the month ended.

By late March, GBP/USD was trading in a broad 1.3300 to 1.3500 range, with no clean breakout. The pair’s inability to hold stronger gains suggested that while Sterling had recovered from its early-month weakness, the market still preferred to buy the Dollar on geopolitical stress and remained cautious on the UK outlook.

EUR/USD

EUR/USD also spent most of March on the defensive, though its path was not as sharp as Sterling’s at times. The month opened with the pair falling away from the higher levels seen in February as the conflict in the Middle East drove flows back into the Dollar. The pair moved below 1.1700 and then came under renewed pressure around the 1.1600 area.

The Euro’s problem was twofold. Like Sterling, it had to deal with a stronger Dollar during risk-off moments. But unlike Sterling, it also faced growing concern about the Eurozone’s direct exposure to energy supply risk. Rising oil prices created fears that inflation in the region could remain uncomfortable for longer, especially going into the next winter season. That made the policy outlook more difficult. Traders began to consider whether the ECB might have to adopt a firmer tone, or even keep the door open to hikes if price pressures intensified.

Even so, EUR/USD struggled to benefit from that inflation argument because the Dollar’s safe-haven demand remained stronger in the first half of the month. The pair fell toward 1.1530 to 1.1550 and was repeatedly described as trading from the back foot. Support around 1.1500 became a major focus. Traders were reluctant to push aggressively through that zone, in part because the move was starting to look stretched, and in part because the Euro still retained medium-term support from a less dovish ECB outlook.

Mid-month, the pair attempted to stabilise. It recovered above 1.1550, then moved toward 1.1600, with markets increasingly focused on upcoming ECB communication. The ECB held rates at 2.15%, but the tone after the decision was more important than the decision itself. Traders began to discuss the possibility that higher energy prices and imported inflation could force the ECB to keep policy tighter than expected. That helped EUR/USD find a floor.

Toward the latter half of the month, the pair showed signs of recovery but remained fragile. It repeatedly struggled to hold above 1.1600, and every move higher was checked by a return of Dollar demand or by fresh geopolitical concerns. Even when PMI data or sentiment data from Europe offered some support, these domestic positives were often overwhelmed by broader market flows.

The final week of the month saw a more mixed tone. The pair briefly approached a monthly high near 1.1640, then slipped back below 1.1600 as the market remained defensive. However, by the end of March, EUR/USD was no longer in a one-way decline. It had settled into a narrower range around the mid-1.15s, suggesting that the most aggressive Dollar-driven selling pressure had eased.

Overall, March was a weak month for EUR/USD, but not a collapse. The pair spent much of the period under pressure from a stronger Dollar and energy concerns, yet it also benefited from the idea that the ECB may not have as much room to ease as once expected.

GBP/EUR

GBP/EUR was more contained than either GBP/USD or EUR/USD, but it still experienced plenty of short-term volatility. The pair spent much of the month in a broad 1.1450 to 1.1600 range, with repeated shifts in direction depending on whether Sterling or the Euro was performing better against the Dollar at any given time.

At the start of March, the pair held relatively firm around 1.1400 to 1.1450 despite the broader market stress. This reflected the fact that both Sterling and the Euro were under pressure against the Greenback, limiting the size of moves in the cross. Early in the month, EUR weakness against the Dollar allowed GBP/EUR to push back above 1.1450 and later recover toward 1.1500.

As the month progressed, the pair gradually strengthened. There were several sessions where GBP/EUR moved toward 1.1550 and even challenged 1.1600. This was helped by periods where Sterling recovered more strongly than the Euro against the Dollar, especially when EUR/USD struggled with energy-related concerns.

However, GBP/EUR consistently found resistance in the upper 1.15s. Traders were reluctant to chase the pair higher because the fundamental case for Sterling remained uncertain. Concerns about UK borrowing costs, stagflation risk and the BoE outlook limited confidence in sustained GBP outperformance. At the same time, the Euro retained enough relative support from ECB expectations to stop the cross from developing a clean upward trend.

By the end of March, GBP/EUR had settled again around 1.1550, still unable to break clearly above resistance. The month reinforced the idea that this pair remains highly dependent on relative moves in the two major USD pairs, rather than strong independent direction from UK or Eurozone data alone.

Key Market Influences

The biggest influence on markets in March was the conflict in the Middle East. The US strike on Iran and the resulting rise in oil prices changed the policy and inflation outlook for all three major central banks. This was the main reason the Dollar regained safe-haven support and why both Sterling and the Euro came under pressure.

The second major driver was the reassessment of rate expectations. The market moved away from the idea of near-term BoE cuts, while the Fed was also seen as less likely to ease quickly because inflation remained sticky. At the same time, the ECB was increasingly viewed as needing to stay cautious because of energy-driven inflation risks.

Political headlines also mattered. Trump’s statements on Iran, naval convoys, and diplomatic contacts repeatedly moved markets and created sharp but short-lived shifts in sentiment.

Finally, technical levels played a strong role. GBP/USD repeatedly reacted around 1.3300, 1.3400 and 1.3500. EUR/USD was anchored around 1.1500 to 1.1600. GBP/EUR spent most of the month trapped between 1.1450 and 1.1600.

Outlook for April 2026

March ends with markets more cautious and more headline-sensitive than they were at the start of the month. For GBP/USD, the key question is whether Sterling can hold above the mid-1.34s if energy concerns remain elevated. For EUR/USD, support around the mid-1.15s now looks important, but the pair will still react heavily to both ECB language and geopolitical developments. For GBP/EUR, a breakout above 1.1600 would require clearer Sterling outperformance, while renewed Euro strength could pull the pair back toward the lower end of its range.

If the Middle East situation worsens further, the Dollar may continue to benefit in periods of stress. If tensions ease, markets may return to focusing more directly on central bank decisions and inflation data. Either way, April is likely to begin with FX markets still trading carefully rather than confidently.