GBP dropped this week on the back of the BoE’s unchanged policy decision. Economists at Rabobank have revised down their six-month EUR/GBP forecast modestly.
Gloomy economic outlook for the Eurozone
The dip in GBP after the steady policy decision from the BoE this week has lifted EUR/GBP towards the top of its range, just shy of 0.87.
This month, the ECB significantly cut its growth forecast for the region. However, these still look optimistic compared to our own forecasts for the eurozone of a technical slowdown in H2 2023 and a very shallow recovery next year. Given this outlook, we see a risk of EUR/GBP falling to 0.85 on a three- to six-month view.
We continue to expect Cable to languish around 1.23 into year-end, with downside risk to this view on the back of the resilience of the US economy and a strong USD.
