Nomura forecasts EUR/GBP at 0.90 due to narrowing rate differentials and UK political-fiscal risks.
Nomura’s FX strategy team expects the Euro to strengthen against the British Pound, targeting EUR/GBP at 0.90 in the coming months. The call is driven by a more hawkish European Central Bank stance relative to the Bank of England, alongside narrowing front-end rate differentials and persistent UK political and fiscal risks.
The team highlights a projected ECB terminal rate of 3.00% by 2027, compared to a BoE rate of 3.50%, with one hike this year and two cuts next year. This divergence, coupled with a shrinking 2-year rate spread from 140bp to below 100bp, underpins their bullish EUR/GBP view. The pair has struggled to break higher despite GBP pressures, but clearer policy divergence is seen as a catalyst.
Nomura maintains a long EUR/GBP position, citing recent ECB hawkishness and upside price pressures as key drivers for Euro outperformance. UK political and fiscal uncertainties remain a headwind for the Pound.