Bank of Ireland economist Dan McLaughlin says sterling is set to strengthen in the coming weeks and is likely to trade at close to 66p against the euro.
Writing in the bank's latest economic bulletin, the economist says the strengthening of sterling will have implications for the Irish economy as the UK is still Ireland's largest trading partner, taking around 20% of Irish exports and accounting for almost 30% of total imports.
'These figures understate the effective impact of any change in the euro/sterling rate, as the indigenous sector probably sells over half its exports into the UK market, and some two-thirds of Ireland's food and drink imports come from Britain,' Dr McLaughlin says.
He says it is fortunate that the euro has moved in a relatively narrow band of 66-70p against sterling for two years now.
Dr McLaughlin says this range coincides with sterling's old limits within the Exchange Rate Mechanism before its exit in 1992. 'The currency has effectively joined the euro,' he says.
