The Pound will come under depreciation pressure in the medium term – Commerzbank

The Pound has been able to hold at high levels against the EUR in recent months. Economists at Commerzbank analyze GBP outlook.

GBP supported in the short term

We have adjusted our forecasts, as inflation in the UK, which is still quite high for the time being, should maintain rate hike expectations for the BoE, from which the Pound should benefit. At the same time, recession concerns for the eurozone should weigh on the EUR.

In the medium term, however, we continue to expect an upward movement in EUR/GBP. 

We expect the BoE to cut its key rate again in the middle of next year in view of the weak economic development. In contrast, we expect the ECB to leave its key rate unchanged, contrary to the market's belief. This should make the ECB more hawkish, which will make the EUR more attractive against the Pound.

Source: Commerzbank Research