ING’s Francesco Pesole observes EUR/GBP has slipped back to the 0.8550-0.8560 area as the earlier Euro premium fades and bond market calm returns. He expects the pair to track rate differentials in a low-volatility environment, but still favours higher EUR/GBP, targeting 0.870 in coming months as he sees current Bank of England tightening expectations as too hawkish.
Sterling outlook tied to repricing risk
“EUR/GBP has gradually eased back to the pre-UST buybacks 0.8550-60 area – a signal the positive premium on the euro has been scaled back.”
“If calm is indeed restored in the bond market, expect the pair to return to tracking short-term rate differentials closely.”
“That could mean a low volatility environment though, as the UK calendar is rather empty for the next couple of weeks.”
“We still expect no hikes and a move to 0.870 in the coming months on the back of dovish repricing in the GBP front end.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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