Economists at Rabobank retain a constructive view for the Pound Sterling (GBP) this year.
EUR/GBP to move lower toward 0.8400 in the latter half of this year
On balance, we retain a modestly constructive picture for GBP vs. the EUR for the year ahead. This is supported by our house expectation that the BoE could retain steady policy until September. This compares with our forecast of rate cuts from both the ECB and the Fed in June. We continue to forecast a move to EUR/GBP 0.8400 in the latter half of this year.
We expect that the interest rate differential, signs of an improving UK economic outlook combined with the prospect of a dull UK election and a relatively stable political backdrop should provide moderate support for the Pound.
We see Cable recovering to the 1.3000 area on a 12-month view, though we see scope for dips on a one-to-three-month view on bouts of broad-based USD strength.
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