EUR/GBP to climb above 0.90 in the coming quarters – Commerzbank

In the UK, the impression remains of a central bank that is merely reacting to the inflation development. Economists at Commerzbank analyze the GBP outlook. 

Scepticism about whether the BoE will manage to fight the high inflation sustainably to weigh on the GBP

The BoE seems to be chasing inflation developments rather than fighting them with an active monetary policy, which is damaging for Sterling.

We expect EUR/GBP to climb above 0.90 in the coming quarters. 

The BoE's cautious monetary policy is likely to weigh on the Pound. Moreover, the BoE is likely to start cutting interest rates next year. In contrast, we do not expect the ECB to lower its key rate, contrary to market expectations. This should prove the ECB to be more hawkish, which should support the EUR.

Source: Commerzbank Research