EUR/GBP Forecast Amid Rising in the EU and the UK

The EUR/GBP price has been relatively volatile in the past few days as investors focus on the happenings in the UK and Europe. It surged to a high of 0.9283, which was the highest level since 2020. At its peak, the pair was about 13% above the lowest level this year.

Focus on the ECB and BoE

The EUR/GBP price surged as the British pound crashed following the new tax cuts that were implemented by the new administration. The tax cuts are expected to cost the economy over 45 billion pounds and lead to a substantial increase in the country’s budget deficit. As a result, analysts started comparing the UK with an emerging market economy. 

In an emergency meeting on Wednesday, the Bank of England announced its first intervention. The bank will initiate a 65 billion pound bond-buying program aimed at stemming the ongoing crisis. Analysts estimate that UK stocks have shed over 500 billion pounds of value in the past few days. 

The bank will buy 5 billion pounds worth of long-dated bonds every day in the coming 13 days. As such, analysts worry that the situation in the UK will worsen since these funds will spur inflation. This is notable since UK inflation is expected to hit 20% in 2023 if the government unloads the ongoing support measures. 

The EUR/GBP price retreated after hawkish statements from several ECB officials. In a statement at an Atlantic Council event, she said that the bank will likely hike by 0.75% in October and December. The bank has already raised rates from -0.50% to 0.75%. Other members like the Finnish and Slovakia central bank officials were supportive of another 0.75% hike.

EUR/GBP forecast

The weekly chart shows that the EUR to GBP exchange rate jumped sharply this week. It then pulled back to the current 0.8940. The pair has moved slightly above the 25-day and 50-day moving averages while the Awesome Oscillator has moved above the neutral level.

Therefore, the pair will likely resume the bullish trend as buyers target this week’s high of 0.9283. A move below the support at 0.8800 will invalidate the bearish view. Find out how to send money to the UK here.