Gbpeur Will Decline Next Year

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Gbpeur Will Decline Next Year

Gbp/Eur Will Decline To 1.124 In 12 Months

Danske Bank's new forecast sees the GBP/EUR heading towards 1.124 in the next 12 months. This comes at a time when the GBP/EUR is still trading near 1.14.

Looking ahead, the GBP/EUR pair faces resistance at 1.15, 1.18, and then 1.20 levels. On the way down, the support levels are at 1.13 and then 1.10.

Interest Rate Difference Will Favor Eur

In simple words, the GBP is expected to lose ground against the EUR in the next 12 months. According to Danske Bank, they expect consistent but controlled selling in the GBP on a 12-month view.

The GBP continues to experience the ill effects of a weaker-than-expected inflation. According to analysts, this means there's now a higher chance that the BoE will have to cut the rates. That's the only way to stimulate growth in the UK economy and to bring inflation back to normal levels.

In the next 12 months, the markets will remain sensitive to the fiscal policy. But the GBP is expected to not benefit much from the gains in the UK stock market.

Danske Bank also added that they still believe that one more rate cut will be delivered by the BoE before the end of this year. Also, the markets have mostly priced in the rate cuts, but an outsized rate cut could push the GBP lower.

In 2026, Danske is forecasting 2 more rate cuts from the BoE. So, we can expect the yields to start moving against the GBP. In addition, Danske doesn't forecast any rate cuts from the ECB in 2026.

So, the bottom line is that the BoE will have to cut the rates as the inflation is weaker than expected. Meanwhile, no rate cuts are expected from the ECB.

This interest rate difference will work in favor of the EUR against the GBP. Also, the growth rate of the Eurozone is expected to stay higher than that of the UK in 2026.

Last but not least, the global environment remains uncertain, which will also hamper the GBP and the UK's economy in general.

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