• Sterling likely to stay under pressure in coming year, GBP/EUR likely to trade at 1.07 by end-2018

    Source: FxWire Pro - Commentary / 24 Oct 2017 15:02:30   Eastern Standard Time

    The British pound has depreciated against the euro from its recent highs of about 1.14, after the increased U.K. political uncertainties about the government leadership and progress on Brexit negotiations. However, the Bank of England is still expected to hike rates in November for the first time in over a decade, reversing last year’s emergency cut, as policymakers respond to the possible effect of capacity constraints on medium-term inflation, stated Lloyds Bank in a research report. The BoE is expected to hike rates further in the second half of next year.

    In the meantime, the euro area economic growth is likely to surpass 2 percent in 2017, outperforming the U.K. economy, although underlying inflationary pressures continue to be sufficiently weak to warrant just a gradual withdrawal of ECB policy stimulus in 2018. The ECB is likely to announce the “bulk of the decisions” during its meeting this week.

    “Overall, we expect sterling to remain under pressure over the coming year and see GBP/EUR falling to 1.07 at end-2018, before recovering slightly to 1.09 at end-2019”, added Lloyds Bank.

    At 18:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 29.6876, while the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 64.1126. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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