Synopsis:

Danske Bank anticipates a rise in the EUR/GBP exchange rate following the upcoming Bank of England (BoE) meeting. Expected dovish adjustments in the BoE's stance and communication could influence market perceptions and currency valuations.

Key Points:

• Unchanged Bank Rate: Danske predicts the BoE will maintain the Bank Rate at 5.25%, with a voting split of 7-2, aligning with market consensus.
• Dovish Shift: Expectations lean towards a dovish pivot, with potential signals from the BoE about the commencement of a rate-cutting cycle, likely starting with a 25 basis point cut in June.
• Inflation Forecast Revision: The BoE may adjust its medium-term inflation forecasts downward, which could further support a dovish outlook.
• Market Impact: Such dovish developments are expected to weaken GBP against EUR, leading to an increase in the EUR/GBP rate by the day's end.

Conclusion:

Danske forecasts a higher EUR/GBP exchange rate as a result of the BoE meeting, driven by anticipated dovish shifts in monetary policy outlook and inflation expectations.