The Bank of England (BoE) is set to undertake a gradual tightening of monetary policy, which will put the pound under depreciation pressure, economists at Commerzbank report. Moreover, the EUR should benefit from the ECB's interest rate hikes from the summer onward. Thus, EUR/GBP is set to grin higher until end-2022

Cautious BoE to weigh on sterling

“The BoE is continuing its gradual tightening of monetary policy. However, it is likely to act less restrictively than expected by the market. The pound should suffer increasingly from this.”

“Another burdening factor is that the ECB is also likely to initiate its monetary policy turnaround in July. We, therefore, expect EUR/GBP to trade higher in the course of the year.”

“Since the ECB is likely to pause after three rate hikes, while the BoE in our opinion will tighten its monetary policy further in 2023, the pound should be able to appreciate again against the EUR in 2023.”