• GBP/EUR likely to trade around 1.16 by end-2017, says Lloyds bank

    Source: FxWire Pro - Commentary / 15 May 2017 18:21:19   Eastern Standard Time

    Given that the euro is rising, the British pound has more than kept its own strength against the euro, briefly rising above EUR 1.20 after PM May’s election announcement, noted Lloyds Bank in a research report. As both the regions are expected to keep their policy rates on hold in 2017, monetary policy developments are not expected to be the driving force behind the currency pair in the coming twelve months.

    There is a risk that the Bank of England might begin discussing the possibility of further policy tightening, especially if the economy is likely to hold up well and ‘core’ inflation moves higher. Meanwhile, with European data continuing to rebound, there is a risk that the European Central Bank might also begin to sound less dovish. In all, the possible upside for sterling appears restricted, with the risk that GBP/EUR comes under additional pressure in response to solid euro area data and once the Brexit talks start in earnest.

    “Our central expectation is for GBP/EUR to end the year around 1.16. Given the prevailing political and economic risks, there is scope for significant bouts of volatility in the interim”, added Lloyds Bank.