The Bank of England (BoE) is ready to undertake a gradual tightening of monetary policy, which will put the pound under depreciation pressure, report economists at Commerzbank. Furthermore, the EUR should benefit from the ECB’s interest rate hikes starting in the summer. Therefore, the EUR/GBP is set to go even higher until the end of 2022
Cautious BoE weighs on sterling
“The BoE continues with its gradual tightening of monetary policy. However, it is likely to act less restrictively than expected by the market. The pound should suffer more and more from this.”
“Another loading factor is that the ECB is also likely to start its monetary policy change in July. Therefore, we expect EUR/GBP to trade higher over the course of the year.”
“As the ECB is likely to pause after three rate hikes, while the BoE will, in our view, further tighten its monetary policy in 2023, the GBP should be able to appreciate again against the EUR in 2023.”
Source: Fx Street
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