EUR/GBP: Signs of faltering growth to dampen the pound – Rabobank

Concerns about the UK’s growth outlook were highlighted last week by the IMF, which warned of more longer-lasting damage to the UK economy than any other country in the G7. Consequently, economists at Rabobank see a bumpy road ahead for the pound.

EUR/GBP still seen at 0.85 on a three-month view

“The IMF’s forecasts indicated that while most other advanced nations were on track to return to their pre-pandemic growth trends next year, and to exceed it by 2024, the UK’s economy would still be 3% smaller in 2024. This warning may be feeding concerns about the medium-term outlook for GBP.”

“Although the hawkishness of the BoE has pushed EUR/GBP moderately lower, both the Bank and GBP will be judged harshly if the UK recovery shows signs of faltering in the new year.”

“Despite the hawkish tone of the BoE, we retain a three-month EUR/GBP forecast of 0.85.”