EUR/GBP to soar as the BoE faces a tougher task than the ECB – Commerzbank

The Bank of England (BoE) is really facing a tough task. Thus, economists at Commerzbank expect the EUR/GBP pair to advance nicely.

Is the BoE facing a tougher time than the ECB?

“This loss in confidence is difficult to regain. A 50 bps rate hike is hardly going to be sufficient to regain it. That is generally expected. 75 bps would constitute a completely different message to the market, but due to the foreseeable economic misery in the UK the BoE is likely to be reluctant to implement that.”

“The BoE t will have to achieve a balancing act between rate hikes and the risk of a more prolonged lean period for the economy while at the same time signalling to the market that it is taking the fight against inflation seriously. In the end, inflation also translates into a loss in prosperity for society.”

“The rise in GBP/USD over the past weeks is due to the weakening of the Dollar. So far Sterling has stood up against the Euro. If it becomes obvious for the market though that the BoE is facing a tougher task in manoeuvring between inflation and recession than the ECB – which is what it looks like – meaning that the ECB is finding it easier to continue its rate cycle, I expect to see rising EUR/GBP levels.”