EUR/GBP to move modestly higher in the coming year to 0.89 – Danske Bank

On Thursday, EUR/GBP declined on the back of the BoE statement but fully retraced the move following the ECB meeting. Economists at Danske Bank analyze the pair’s outlook.

Push-back on rate cut expectations

The Bank of England (BoE) decided to keep the Bank Rate (key policy rate) unchanged at 5.25%. 

The BoE delivered hawkish communication in an attempt to push-back on market expectations of rate cuts next year.

Overall, we see relative rates as a negative for GBP and see the recent rebound as attractive levels to sell GBP. We continue to forecast EUR/GBP to move modestly higher in the coming year to 0.89.