April 2026 Currency Market Update

Our monthly round-up of the key currency moves affecting UK businesses. April 2026 has seen a significant shift in the global rate narrative, with central banks in the US, UK, and Eurozone all stepping back from easing and beginning to contemplate tighter policy.

The Pound

Pound Steadies as GDP Surprise Offsets Inflation Fears

What a treat to be able to start a currency update focused on the Pound with some positive news from the UK. Figures released from the Office for National Statistics (ONS) last week showed the UK economy grew by a faster-than-expected 0.5%, while also revising the January estimate upward after previously suggesting the year began with zero growth. To cling to the positive theme, it shows the UK likely entered the energy shock (triggered by the US/Iran conflict) on a stronger footing than many expected, even if we must concede that upward GDP is unlikely to continue.

The latest inflation data confirms the weight of those concerns. The ONS reported that CPI inflation rose to 3.3% in March, up from 3.0% in February. The rapid rise in fuel prices, driven by the ongoing conflict, is clearly the primary culprit, pushing the inflation trajectory back toward 4% and effectively burying the possibility of further interest rate cuts this year. However, Bank of England Governor Andrew Bailey has been quick to play down any expectations of an imminent rate rise, advocating for a "wait and see" approach.

The suggestion is that the Bank will likely hold rates steady at 3.75% at the upcoming April meeting to avoid overreacting to what could be temporary supply-side pressures. This still represents a significant shift in the longer-term outlook. Just two months ago, the expectation was for UK interest rates to head toward 3.25% by year-end; now, most are betting on a move toward 4.25%. This increase in potential yield could well lend the Pound more support as we move through the year.

Of course, currency markets are relative, and we have seen a similar shift in forecasts from the US Fed. For the first time in over a year, the latest FOMC minutes show some officials believe an interest rate rise could be justified due to the conflict’s impact on inflation. This suggests that rather than heading toward 3%, the longer-term expectation is a move back to 4%.

The US Dollar

Dollar Supported as Fed Hints at Possible Rate Rise

The dollar has traded firmly this month, bolstered by a shift in tone from the Federal Reserve that markets were not fully prepared for. The release of FOMC minutes from the March meeting revealed that a number of officials had begun discussing the possibility of a rate hike — the first such discussion in over a year, and a significant change in the narrative that had been firmly focused on when cuts might begin.

Longer-term interest rate expectations have moved sharply. The market-implied terminal rate has drifted from around 3% back toward 4%, reflecting growing concern that inflation may prove more persistent than previously hoped. Energy prices, services inflation, and a resilient US labour market all point to an economy that is running hotter than the Fed would like.

For businesses with significant dollar exposure — whether paying USD-denominated invoices or receiving USD revenues — this shift matters. A stronger dollar raises the cost of imports and payments, while USD receivables become more valuable. With Fed policy now genuinely uncertain in both directions, this is a good time to review your hedging position.

The Euro

Euro Wobbles as ECB Abandons Rate Cut Narrative

The euro has come under pressure as the European Central Bank's tone has shifted more decisively than many anticipated. After a series of rate cuts through 2024 and early 2025, ECB President Christine Lagarde signalled at the April press conference that the easing cycle is effectively over — and that a rate rise could be on the table later in 2026 if inflationary pressures persist.

Eurozone CPI surprised to the upside in March, driven largely by services inflation and a rebound in energy costs. Germany reported stronger-than-expected industrial output, suggesting the feared recession may have been avoided — though the picture across member states remains uneven.

Lagarde struck a cautious note, emphasising that decisions would remain data-dependent and that the ECB would not commit to a particular path. Nevertheless, the abandonment of the rate-cut narrative has weighed on the single currency. EURUSD has retreated from recent highs, though the pair remains above key support levels. Businesses with European payment flows should watch the ECB's next meeting closely.

Australian Dollar

Further afield, the Reserve Bank of Australia (RBA) isn't just talking about the threat to inflation; it’s already on the move. While Bailey and Lagarde urge caution, RBA Governor Michele Bullock has already pushed rates up to 4.10% with hints of more to come. Yet, the Aussie Dollar remains sensitive to trade tensions between China and the US. Even a hawkish central bank can’t always outrun a global trade war.

Finally, we must acknowledge that most 2026 forecasts were effectively torn to shreds by the end of Q1, a stark reminder of the unpredictability that continues to define the Trump era, where forecasts need to be rewritten in a single afternoon by a geopolitical shock or a sudden shift in trade policy. For now, the narrative has firmly shifted from "how low can rates go" to "who will hike next."

Adam Jordan

Current Market Rates — 21 April 2026

GBPEUR 1.1530 | High: 1.1615 | Low: 1.1377

GBPUSD 1.3485 | High: 1.3772 | Low: 1.3251

EURUSD 1.1700 | High: 1.2083 | Low: 1.1532

Rates shown are indicative mid-market rates for reference only.

Want to discuss how these moves affect your business? Get in touch with the Pathfinder FX team.