The Pound to Euro (GBP/EUR) exchange rate has slipped back towards the 1.15 level in early February trading, with the Sterling cross losing ground after failing to sustain January gains above 1.16.
Pound to Euro (GBP/EUR): 1.14788 (-0.73%)
Pound to Dollar (GBP/USD): 1.35283 (-0.86%)
Euro to Dollar (EUR/USD): 1.17855 (-0.14%)
Nomura maintains a bearish view on sterling and is positioned for EUR/GBP strength, targeting a move towards 0.8950 as UK political and monetary policy risks intensify.
This converts to a level of 1.11731 for those interested in the pound-to-euro exchange rate.
The bank highlights rising political pressure on Prime Minister Starmer as a key downside risk for the pound, warning that any further instability could unsettle gilt markets and trigger renewed capital outflows.
Nomura also sees growing risks of more dovish Bank of England policy following a softer-than-expected vote split at the latest meeting, arguing that UK rates could move closer to the mid-point of the central bank’s neutral range.
In contrast, the bank notes that risks around European Central Bank policy are shifting, with increasing potential for future tightening rather than easing, which would narrow rate differentials and support the euro.
Nomura adds that improving sterling positioning leaves scope for investors to rebuild short pound exposure, increasing the risk of further GBP weakness against the euro.
