EUR / GBP has continued to decline, helped by a rapid vaccination process in the UK and by the Bank of England (BoE), which ruled out negative rates for now, economists at Danske Bank note. They believe that the British pound will strengthen this year driven in particular by the faster vaccination process and they forecast that the EUR / GBP pair will hit 0.85 on a six to twelve month outlook.
Key statements:
“In the short term, the economic outlook still looks bleak amid the third national blockade. However, the UK is vaccinating at a much faster rate than the rest of Europe, which, combined with the Brexit deal, means that the UK will outperform the rest of Europe beyond the first quarter of 21. “
“The British pound strengthened after the recent Bank of England meeting, where it did not appear that the Bank of England was about to push rates into negative territory, prompting a price revision. We expect the Bank of England to keep the bank rate unchanged at + 0.1%. However, this scenario is already discounted in the price. “
“We hope that EUR / GBP remains in the 0.87-0.88 range for now. We expect the crossing to move lower when it becomes clearer that the UK will be one of the first countries to emerge from the pandemic, benefiting from its ‘first dose first’ strategy. We forecast the EUR / GBP at 0.86 in three months and at 0.85 in six to twelve months. “
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