GBP/EUR Outlook: The outlook for GBP/EUR is 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 is taking a cautious approach with potential future rate cuts, contrasting with the European Central Bank's stable policy.
• Risk/commodities: Oil prices are at recent highs, which could potentially support the euro due to its economic implications, but this trend also adds uncertainty to the pound.
• One macro factor: The UK's GDP growth is projected to slow, which could weigh on the pound's performance amid global economic challenges.
Range: GBP/EUR is likely to drift within its recent 3-month range, showing limited volatility.
What could change it:
• Upside risk: Improved economic data or a shift in the Bank of England's monetary policy could enhance demand for the pound.
• Downside risk: Increased geopolitical tensions or negative trade developments affecting the UK economy could pressure the pound lower.
