The GBP to EUR exchange rate shows a bullish bias, supported by recent Bank of England (BoE) signals suggesting slower interest rate cuts.
Key drivers include the interest rate differential, as the BoE indicated a cautious approach to future cuts, while the European Central Bank (ECB) remains wary of a strong euro impacting inflation. Inflation in the UK appears to be slowing, providing another layer of support for the pound.
The trading range in the near term is expected to remain stable, likely fluctuating around current levels as the pound sits near 60-day highs at 1.1468, which is above the three-month average.
Upside risks could stem from stronger-than-expected UK retail sales, indicating resilience in consumer spending. Conversely, a slowdown in economic growth forecasts for the UK could weigh on the GBP, especially if the ECB's outlook on eurozone growth remains robust. The EUR may also be influenced by global oil price volatility, which is presently below its three-month average.