Forecast euro pound sterling for 2018 and 2019 (updated)

Forecast for 2018 euro and pound sterling 2019 (updated)

The  Department of Analysis of Bankinter  points out in its  Strategy Report Second Quarter 2018  its  forecast euro pound for 2018 and 2019.

Euro British Pound forecast for 2018 and 2019

The strategy of the Bank of England seems to work and the price of the pound remained stable against the euro  since early this year in a range between 0.87 / 0.89 – in line with our forecasts for 2018 and 2019 – currently 0 85 / 0.90.

Analysis of forecast euro pound sterling

The Bank of England manages the message to support the market price of the pound and the “Brexit” is postponed until December 2020

UK faces major challenges in 2018/2020. The market attention focuses on the management of  “Brexit”  and the direction of monetary policy,  but the outcome of the local elections on May 3, can change the view of investors on the British economy if as noted by polls the Labor Party emerges stronger.

“Brexit”  The preliminary agreement recently reached with the Economic and Monetary Union to maintain the current legal framework until December 2020 represents  a boost for the price of the pound and the British economy .

The Bank of England is shown determined to tighten monetary policy gradually although  porquela twelve months accumulated inflation above the target of price stability. The horizon marked by the Bank of England to raise interest rates – over the next three years – and his insistence that the increases will be gradual, makes us think that  only a rise in the interest rate by +25 basis points occur until 0.75% in 2018 and two more in 2019 increases to 1.25% .

We think the Bank of England manages the message to support the market price of the pound , contain inflation expectations and prevent undesired tightening in financial conditions. The strategy of the Bank of England seems to work and the price of the pound remained stable against the euro  since early this year in a range between 0.87 / 0.89 – in line with our forecasts for 2018 and 2019 – currently 0 85 / 0.90.

We think a  sharp rise in interest rates would be detrimental to the British economy and domestic demand in particular , with limited impact on inflation  whose increase is explained by the weakness of the pound – expensive imports and production prices -. It is recalled that  the activity indices show signs of slowing , growth in wages is lower than the increase in the index Retail prices (RPI) and the real estate industry accused the uncertainty generated by the  “Brexit”.

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