ExchangeRates.org.uk - After a difficult summer for the Euro, ING expects Bank of England (BoE) rate cuts will be decisive in undermining the Pound with the Pound to Euro (GBP/EUR) exchange rate sliding to 1.1365 on a 12-month view. The Pound has secured support on political grounds with expectations of UK stability following the landslide Labour victory while French parliamentary elections ended in stalemate as the National Patriotic Front (NPF) emerged with the largest number of seats, but no majority.
GBP/EUR is currently trading close to 4-week highs around 1.1865. Following the French results, ING notes the threat of difficult coalition talks and the threat of deadlock. There will also be notable fiscal policy stresses, especially with the NPF maintaining pressure for higher spending. In this context, ING expects the Euro will struggle in the short term. ING is also more positive on the UK growth outlook, but expects that monetary policy will be crucial for the Pound. It forecasts that the BoE will be more aggressive than expected on monetary policy with an Initial rate cut in August followed by two further cuts before the end of 2024. ING expects these rate cuts will be crucial in undermining the Pound over the medium term.
This content was originally published on ExchangeRates.org.uk
