The Euro to Pound Sterling (EUR/GBP) exchange rate held steady at 0.8637, with the pair consolidating as markets digest central bank signals from both the European Central Bank and Bank of England.

MUFG notes that, barring a sharp fall in energy prices, both the ECB and BoE are set to raise interest rates in the coming months, with tightening expectations now largely priced into markets.

“Without a dramatic reversal in energy prices… both the BoE and the ECB will be hiking rates.”

The bank highlights that UK rate expectations have shifted significantly, with markets now pricing between two and three hikes this year, while ECB guidance has been more explicit regarding a near-term move.

MUFG expects limited divergence between the two central banks, suggesting that EUR/GBP is likely to remain rangebound in the near term.

However, the bank sees a modest upside risk for the pair, reflecting slightly stronger signalling from the ECB.

“There was little yesterday to suggest much in the way of policy divergence… and hence, EUR/GBP range trading looks set to continue.”

MUFG expects the Euro to Pound Sterling exchange rate (EUR/GBP) to trade in a narrow range near current levels in the near term, with a modest upside bias towards higher levels, supported by clearer ECB rate hike signals.

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Disclaimer: For information only, not investment advice. This EUR to GBP forecast summarises and interprets third-party research; views expressed are those of the original source and may not fully reflect the source’s complete analysis. Neither the source nor we accept liability for reliance on this interpretation.