Pound To Euro Rate Tipped To End Day Lower Say Danske

According to economists at Danske Bank, the Bank of England (BoE) is anticipated to maintain the Bank Rate at 5.25% on May 9, setting the stage for forthcoming rate cuts.

Analysts expect a dovish stance from the Monetary Policy Committee (MPC), with the first 25bp cut projected in June.

Speculation indicates a cautious tone, potentially driving EUR/GBP higher (and therefore GBP/EUR lower) due to a dovish vote split and a revised inflation outlook.

In their base scenario, analysts predict EUR/GBP to close higher, attributing it to a dovish vote split, revised inflation forecast, and cautious remarks during the press conference.

They view Pound Sterling unfavourably against relative rates, suggesting selling GBP at current levels.

Their latest EUR/GBP forecast projects the Euro at approximately 0.89 against the British Pound within 6-12 months

Key Quotes:

“Overall, we expect the MPC to soften its communication, priming the markets for an imminent start to a cutting cycle. We expect the first 25bp cut in June.”

“Since the last monetary policy decision in March, data has overall been slightly stronger than expected. Both headline and service inflation are slightly above the MPC’s forecast from February and wage growth is likely to overshoot the Q1 forecast of 5.7%.”

“Ramsden, who early in the hiking cycle was a hawkish dissenter, recently struck a dovish tone noting that ‘the balance of domestic risks to the outlook for UK inflation … is now tilted to the downside’.”

“We expect the BoE to prime markets for a rate cut at the meeting next week delivering the first cut of 25bp in June. We expect a 25bp cut in each of the subsequent quarters, totalling 75bp of rate cuts for 2024.”

“In our base case we expect EUR/GBP to end the day higher on the back of a dovish vote split and remarks as well as a downward revision to the inflation forecast in the medium term.”

“We expect this to be cautiously reemphasised during the press conference.

“Overall, we see relative rates as a negative for GBP and see current levels as attractive levels to sell GBP. “

“We forecast EUR/GBP towards 0.89 in 6-12 months.”