October 4, 2023

EUR/GBP: Sterling may struggle to reach 0.84 year-end forecast

EUR/GBP: Heading towards 0.83 by the end of 2022

The British economy has now fully recovered, and while GDP has not returned to its pre-crisis levels, the recovery is well underway. According to economists at Danske Bank, the pound could continue to rise, but at a slower rate than at the beginning of 2021.

Stronger pounds in the coming months

“We continue to expect sterling to rise, albeit at a more moderate pace than at the beginning of 2021.”

“The UK economy appears to be growing faster than the Eurozone, the Bank of England is closer to the beginning of the rate-raising cycle and the British pound will benefit from general investment sentiment, while the US dollar will benefit from Fed tightening and a peak industrial cycle gaining strength.”

“Sterling will be exposed to a scenario where the markets become increasingly pessimistic and/or the UK economy does not live up to expectations.

“Increasing political tensions between the EU and the UK over the Northern Ireland Protocol could also weaken the pound – as could a second Scottish independence referendum.”

“Forecast: 0.85 (one million), 0.84 (3 million), 0.84 (6 million), 0.83 (12 million), 0.83 (end of 2022).”

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