GBP/EUR Outlook:
The GBP/EUR exchange rate is slightly positive but likely to move sideways, trading near its recent average. With the pound showing firmness after comments from the Bank of England, and the euro facing pressures from ongoing geopolitical tensions, both currencies are stabilizing without strong driving factors.
Key drivers:
- Rate gap: The Bank of England's dovish stance, hinting at possible rate cuts, contrasts with the European Central Bank's neutral policy, lessening the gap between the two currencies.
- Risk/commodities: Oil prices are elevated and volatile, affecting the euro as higher costs can push inflation, but this also limits Sterling's strength due to weaker growth projections in the UK.
- One macro factor: Political instability in the UK due to recent resignations adds volatility to the pound, even as economic forecasts suggest slowing growth.
Range:
Expect the GBP/EUR pairing to hold steady within its recent range, with slight resistance near recent highs.
What could change it:
- Upside risk: A significant improvement in UK economic indicators could boost the pound.
- Downside risk: Escalating geopolitical concerns surrounding Ukraine could further weaken the euro.
