UK market forecasts 'overly-pessimistic' as EU deal announced
Sterling continues to be supported by a resilient performance in the UK economy. Last week's employment and first quarter GDP data were generally strong, and confirmed that Britain’s economy is growing at a steady pace, supported by business investment and a robust jobs market with solid real wage gains.
While a slowdown in activity appears highly likely in Q2, not least given tariff uncertainty and rising business costs, we still think that market forecasts for the UK economy are overly pessimistic for 2025.
Bank of England hawkishness and improving commercial relations with the EU are further reasons to be bullish on the pound.
Details of the ‘reset’ in UK-EU relations post-summit will hit the newswires later today, with Britain set to make concessions that would unlock more favourable trade terms.
While many will probably quite rightly slam the deal as a betrayal of the Brexit vote, market participants are unlikely to care and will likely greet the signs of closer UK-EU ties by keeping the pound well bid.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
