GBP/EUR Outlook:
Slightly positive, but likely to move sideways, as the rate is above its recent average but lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England's cautious stance contrasts with the ECB's steady policies, limiting GBP strength.
• Risk/commodities: Oil prices are currently elevated, influencing economic outlooks in both the UK and Eurozone but not providing a direct boost to GBP.
• One macro factor: UK political uncertainty surrounding Prime Minister Keir Starmer has added pressure to the pound, as mixed economic indicators complicate the outlook.
Range:
GBP/EUR is likely to hold steady within its recent range, with limited movement expected.
What could change it:
• Upside risk: A more hawkish tone from the Bank of England could support the pound.
• Downside risk: Continued political instability in the UK may exacerbate GBP weakness.
