British Pound: Dovish repricing points to weakness against Euro – ING
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.
ING analyst Francesco Pesole notes that the EUR/GBP pair has retreated to the 0.8550-0.8560 range as the initial Euro advantage diminishes and bond market stability returns. He anticipates the pair will mirror rate differentials in a low-volatility period, but remains optimistic about a long-term uptrend, targeting 0.870 in the future months.
Pesole perceives the Bank of England's tightening expectations as overly aggressive, which led to the current EUR/GBP premium reduction. With the bond market calming down, the pair should resume tracking short-term rate disparities. This scenario could result in a low-volatility environment, given the UK's sparse calendar in the coming weeks.
Nonetheless, a hike is unlikely, and we anticipate a move towards 0.870 within the next few months due to GBP front-end dovish re-pricing.
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