GBP/USD fell from levels around 1.26 to below 1.24 and EUR/GBP appreciated above 0.85 after the Bank of England (BoE) presented a quite gloomy outlook. The British pound is set to suffer further downside pressure, economists at Commerzbank report.

UK might go through a  much gloomier development economically than Europe

“Shrinking GDP next year, stagnation in 2024 and CPI inflation rising up to 10%. What the BoE presented in its outlook yesterday was really quite gloomy.”

“It is quite possible that the BoE is much less restrictive than it would usually be in view of this inflation momentum. And it is probably clear that this fact is putting pressure on the currency.”

“Countries are well-advised to choose their trade partners based on what states match each other politically. And in the case of the UK, these are mainly European countries. ‘Friend shoring’ is easier within an economic union than outside. This suggests that yet another optimistic idea of the Brexiteers has been made redundant.”

“Great Britain might go through a different development economically, which really will seem much gloomier than in Europe. And that can only be negative for sterling.”