GBP/EUR Outlook:
Slightly weaker, but likely to move sideways as the rate is near its recent average and has insufficient clear direction.
Key drivers:
• Rate gap: The Bank of England's decision to maintain interest rates reflects a more cautious outlook compared to the European Central Bank, which has kept rates steady amid resilience in the Eurozone economy.
• Risk/commodities: With oil prices rising significantly above their average, this could support the Euro amid concerns about European export competitiveness as the currency strengthens.
• One macro factor: The Eurozone inflation has dipped below the ECB's target, potentially leading to future adjustments in monetary policy that could influence the Euro's strength.
Range:
Expect the GBP/EUR to hold within the recent stable range, without significant moves towards the extremes.
What could change it:
• Upside risk: A surprise increase in UK GDP data could bolster the pound's value.
• Downside risk: Continued uncertainty in UK politics could weigh heavily on the pound's performance.