The policy rate spread between the Bank of England (BoE) and the European Central Bank (ECB) is set to halve, according to ING analysts. This means that the difference in interest rates between the two central banks will decrease significantly.
The BoE has been gradually raising its policy rate, while the ECB has been maintaining its rates at a low level. This divergence in monetary policy between the two institutions has been a key driver of the EUR/GBP exchange rate.
However, according to ING, this spread is expected to narrow in the near future. This could have implications for the EUR/GBP exchange rate, as the difference in interest rates between the two currencies is a key factor influencing their value relative to each other.
Investors will be closely watching how this development plays out in the coming months, as it could have significant implications for the currency markets.