Market Outlook: Pound Could Strengthen If BoE Takes a Cautious Approach

Forex - Michael Pfister from Commerzbank stated that the British pound could strengthen against the euro next year due to the Bank of England's likelihood of lowering interest rates more gradually compared to the European Central Bank. Pfister projected that inflation pressures and economic growth in the UK would outpace those in the Eurozone. Commerzbank suggested that the plans for trade tariffs by President-elect Trump are likely to have a lesser impact on the UK compared to the Eurozone. They expect the EUR/GBP to drop from its current level of 0.8333 to 0.81 by December 2025. However, they anticipate that the pound will remain flat against the dollar next year, benefiting from better growth and the potential inflationary effects of Trump's trade policies.