Sterling's Gains May Be Premature as Banks Caution on UK-EU Relations and Sluggish UK Growth

UK-EU Relations: Commerzbank warns that optimism regarding improved UK-EU relations is premature, emphasizing that any access to the EU single market would be slow and politically costly, requiring significant concessions from the UK.

Economic Challenges: The bank highlights that the UK's core economic issues, such as weak productivity growth, existed before Brexit, limiting the potential benefits of improved EU ties.

Sterling's Strength: Danske Bank suggests that the recent gains in sterling are overdone, attributing them to improved global risk sentiment rather than solid economic fundamentals, and indicating that further easing from the Bank of England is likely.

Relative Outlook: The contrasting fiscal policies and growth dynamics between the UK and eurozone suggest ongoing structural and cyclical challenges for sterling, making near-term optimism fragile without substantial progress in economic performance.