GBP/EUR Outlook:
Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England has a more dovish stance than the European Central Bank, which may weigh on GBP.
• Risk/commodities: Recent oil price volatility, remaining above average, may generally impact EUR as higher energy costs can affect economic stability in the Eurozone.
• One macro factor: UK retail sales saw significant growth, but the pound remains constrained by political uncertainties.
Range:
GBP/EUR is likely to hold within its recent range given the stable trading conditions and absence of decisive factors.
What could change it:
• Upside risk: A surprising increase in UK GDP could boost confidence in the pound.
• Downside risk: An escalation in geopolitical tensions affecting the Eurozone could lead to EUR strength against GBP.
