GBP/EUR Outlook:
The GBP/EUR rate is slightly positive, trading above its recent average and near recent highs. However, signals are mixed as economic data from both the UK and the Eurozone is set to guide future movements.
Key drivers:
• Rate gap: The Bank of England is expected to hold interest rates steady, while the European Central Bank is likely to maintain an accommodative policy stance, creating uncertainty between the two currencies.
• Risk/commodities: Oil prices are currently above average, which may bolster the euro as it impacts overall economic stability within the Eurozone.
• One macro factor: Recent weak industrial production data from the Eurozone raises concerns about economic performance, which could weigh on the euro.
Range:
Expected GBP/EUR movements are likely to hold within the recent 3-month range as markets digest upcoming economic data.
What could change it:
• Upside risk: Stronger-than-expected UK employment data could boost the pound.
• Downside risk: Further deterioration in Eurozone economic data could pressure the euro lower.
