The DBS Bank economists expect euro and sterling to remain under pressure for nowamid economic concerns.
On the defensive with the euro and the pound
“ECB President Christine Lagarde declined to say whether inflation has peaked and acknowledged that rate hikes will be needed at several meetings to curb demand. However, the tightening comes as the Bloomberg consensus expects the Real GDP growth flattens to 0% qoq in the third quarter of 2022 (vs. 0.7-0.8% growth in the previous two quarters) before turning negative in the fourth quarter of the year and the first quarter of 2023. Against this background of weakness, we see no reason for the euro to break above parity.”
“Despite the reversal of the abolition of the top 45% income tax rate, Fitch downgraded the UK’s long-term external debt rating outlook to ‘AA’ from stable to negative. Attention is also turning to how the UK can attract foreign capital to finance a current account deficit that widened to 8.3% of GDP in the first quarter of 2012. As more questions are raised about the UK’s weakening fundamentals UK, it’s probably best to stay defensive on the British pound.”
Source: Fx Street
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