Analysts at Danske Bank, de do not see the global investment environment nor the relative growth outlook creating significant divergence between the Euro and the Pound. They forecast the EUR/GBP pair to move only modestly higher to 0.88 over the coming year.
End to the hiking cycle, but not to the GBP headwinds
The Bank of England (BoE) decided to keep the Bank Rate unchanged at 5.25% at its September meeting after hiking the Bank Rate by a total of 515bp over the past meetings. We expect this to mark the peak in the Bank Rate. This is slightly below current market pricing, which is pricing a peak at 5.45%. On balance, we continue to see relative rates as a moderate positive for EUR/GBP, although GBP has been largely decoupled from moves in relative rates the past month.
Over the past month, EUR/GBP has moved to the upper part of recent months’ trading range of 0.85-0.87. On one hand, GBP has gained support from an overall USD-positive global investment environment and higher energy prices. On the other hand, a dovish BoE and lower than expected inflation have acted as a headwind.
We do not see the global investment environment nor the relative growth outlook create significant divergence between EUR and GBP. We expect the cross to move only modestly higher to 0.88 over the coming year.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.