EUR/GBP Outlook:
Slightly weaker, but likely to move sideways as the rate is below its recent average and near mid-range.
Key drivers:
• Rate gap: The European Central Bank has maintained steady rates while the Bank of England's dovish stance is creating a widening gap between the two currencies.
• Risk/commodities: With oil prices remaining volatile above their average, the euro is under pressure as energy costs influence inflation and economic stability in the Eurozone.
• Macro factor: Fading political uncertainty in the UK may provide modest support to the British Pound, while economic indicators show mixed signals.
Range:
EUR/GBP is likely to drift within its recent 3-month range, showing stability but lacking momentum to test extremes.
What could change it:
• Upside risk: An unexpected shift in ECB policy or stronger Eurozone growth could boost the euro.
• Downside risk: Further deterioration in Ukraine conflict dynamics or a more aggressive dovish turn from the BoE could weaken the pound.
