Sterling staid but skewed
Looking at EUR/GBP over the past few years highlights the importance of interest rate differentials – most notably front-end interest rate differentials – as a core driver of EUR/GBP.
This staid central case scenario underlies our year-end forecast for EUR/GBP of 0.85, sterling’s rise aided by an expected modest tightening by the Bank of England earlier than the European Central Bank. We are neutral on EUR/USD over a three, six and 12-month horizon (target of 1.35). Combining this neutral EUR
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