GBPEUR: What are the Analysts Predicting?

The GBPEUR exchange rate is trading above the 1.1400 level after seeing strong gains on last week’s decision by the Bank of England to hold rates at the record lows of 01.%. The bank also refrained form any further stimulus measures, while pushing out any chance of negative interest rates to summer, but only if conditions deteriorate. The bank were positive about a second quarter rebound should the economy reopen in March.

The pair is finding support and looking for a move to the 1.1500 level which capped prices in April of 2020.

What do Analysts See for the GBP to EUR Rate Outlook?

The following is a summary of some of the recent predictions for the pound and euro:

Mitsubishi UFG

One of Japan’s largest banking institutions sees “further upside for the pound”.

Head of Research for MUFG, Derek Halpenny, said: “Due to the progress on vaccine roll-out the BoE now projects GDP growth from Q2 2021 to Q1 2022 of 14.2%, up from 10% in November. We believe there may be upside risks to this projection”.

The UK has now vaccinated over 12 million of its residents this week and this amounts to upwards of 17% of the population. The euro is far behind this pace due to their buying programs and manufacturer delays. Countries such as Australia are at risk because they only used one supplier. The AstraZeneca vaccine that the regulators are set to approve down under has just been dumped by South Africa due to concerns over its efficacy.

Halpenny added his thoughts on the negative rates projections, saying, “…the window for negative rates has closed in this economic cycle”.

RBC

Currency analysts at the RBC arm of the Royal Bank of Canada have an opposing view on the pound despite sharing the vaccine progress assessment.

The group’s analysts see the UK reaching herd immunity in July compared with August for the US and October in the Euro-zone. Despite the country having a whole quarter of a head-start on Europe, the bank sees weak fundamentals for sterling.

“In isolation this is a positive development for GBP, though there are many other uncertainties overhanging in the near-term.”

RBC notes a large fiscal deficit and current account deficit as the key risks, saying:

“Our longer-term expectations for GBP have to include the risk that attracting the foreign inflows the UK will need requires a relative cheapening of UK assets via the currency.”

RBC also highlighted that French Presidential elections will be held in 2022, with the first round in April and this could pose a risk to the single currency.

“As we get closer to 2022, EUR’s negative political risk premium seems very likely to rise.”

If the GBP to EUR exchange rate gets above the 1.1500 level then the RBC assessment could be very wrong for the year ahead. To discuss the outlook for the pound to euro rate for the year ahead, and a plan for your currency exchange requirement, get in touch using the form below.

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