The Pound to Euro (GBP/EUR) exchange rate has crept higher during April and has nudged above the 1.15 level on Wednesday.
Nomura remains sceptical over the Pound outlook and, indeed, the bank is now more convinced that there will be heavy GBP/EUR losses over the next few months with a slide towards 1.11.
The bank considers that Prime Minister Starmer is now under even more pressure due to the Mandelson affair, increasing the risk of very heavy Labour Party losses in the May 7 local elections. If Starmer is ousted, Nomura expects that a new leader would be less market friendly which would tend to hurt the Pound.
The headline UK inflation rate increased to 3.3% from 3.0%, in line with expectations. As far as interest rates are concerned, uncertainty remains extremely high, but there are fresh doubts surrounding the potential for Bank of England rate hikes.
In contrast, Nomura expects that the ECB will be more willing to raise interest rates to combat inflation which suggests yields will move against the Pound. The bank also notes that the Euro-Zone attracted strong capital inflows during the first quarter of 2026.
