On April 28, 2024, experts predict that the Pound to Euro exchange rate (GBP/EUR) will weaken to 1.1365 by the end of the year due to anticipated interest rate cuts by the Bank of England. However, Credit Agricole believes that weakness in the Euro-Zone manufacturing sector could boost GBP/EUR to 1.19.
GBP/EUR saw a low of 1.1570 early in the week before rebounding to 1.1665. Initially, markets expected an early interest rate cut by the Bank of England, putting pressure on the Pound. However, after Chief Economist Pill’s comments suggesting that a rate cut is not imminent, the Pound strengthened.
The UK currency also received support from rising equity markets, with the FTSE 100 reaching record highs. Discussions continue on the economic fundamentals of the UK and Euro-Zone and their impact on currency markets.
While the UK manufacturing sector experienced a contraction, the services sector showed improvement. Analysts at RBC noted a recovery in the UK economy since late last year, attributing it to developments in real wage growth.
RBC expects the Bank of England to cut rates by 25bps in August, with further cuts later in the year. ING predicts a potential rise in EUR/GBP later in the year, depending on shifts in BoE expectations.
In the Euro-Zone, the German IFO business confidence index improved for the third consecutive month, boosting confidence in the region’s outlook. MUFG suggests that lower rates in the Euro-Zone could support growth, despite expectations of an ECB rate cut in June.
Credit Agricole maintains a negative stance on the Euro due to weak industrial data, highlighting the need for a weaker EUR to help exporters regain competitiveness.
Overall, the Pound to Euro forecast for the week ahead remains uncertain, with factors like central bank policies and economic data likely to influence the exchange rate.