Danske Bank Raise Pound Forecasts vs. Euro Following BoE Meeting

Danske Bank Raise Pound Forecasts vs. Euro Following BoE Meeting

The comment came on the back of a higher growth forecast, with the Bank expecting an average annual expansion of 1.75% over the next three years.

The Pound Euro (GBP/EUR) exchange rate could see some movement tomorrow depending on the result of a run of United Kingdom ecostats.

The projection now is that the next interest rate rise could be in May.

The Bank of England has raised interest rates for the first time since 2007, from 0.25% to 0.5%.

Higher interest rates have an important effect on households and the economy.

On the other hand, however, higher inflation will increase the chances of a near-term interest rate hike and could lead to Pound to Euro gains.

He was speaking a day after the Bank made the surprise announcement it was likely to increase rates sooner rather than later.

"Specifically, the minutes observe that if the economy develops as now expected in the February Inflation Report monetary policy would need to be tightened" Archer said.

"The Bank sees growth at 1.8% this year, with demand interestingly coming from outside the EU".

The central bank has raised its economic growth projection for the coming year to 1.8 percent from 1.7 percent last time, largely because it has raised its global growth forecast to 4 percent from 3.75 percent.


Alex Hutton-Mills, Managing Director at Lincoln Pensions commented: "Today's decision by the MPC to hold interest rates is not surprising given recent events and statements by the Bank on their view of the macroeconomy including, inflation expectations".

Leading economists last week said the BoE will raise rates faster than market expectations, predicting two hikes this year on the back of a stronger United Kingdom economy.

Inflation rose last November to 3.1 per cent, more than a percentage point above target, requiring Carney to write to Treasury chief Philip Hammond to explain what the bank was planning to do about reining in price increases.

Danske Bank have altered their forecasts in anticipation of a stronger Pound having gone into the BoE event wrong-footed, we reported ahead of the event that Danske Bank analysts were actually expecting a negative outcome for the Pound.

It points out that the United Kingdom economic engine still "remains restrained by Brexit-related uncertainty" which is "the most significant influence on the economic outlook".

That was a lot weaker than its expectation of global growth of almost 4% over the same period and was also below the country's pre-financial crisis average of about 2.9%.

Rate rises are bad for them, as it means the cost of borrowing money will likely rise.

The Bank of England is tasked with setting rates to keep inflation near 2 percent.

One big lesson since the Brexit vote is the extent to which the Footsie moves in inverse proportion to the pound, because it is full of big multinationals that make a lot of their sales in dollars and euros, so any drop in the pound flatters those earnings.

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