The British Pound (GBP) maintained its strong 2023 form into early 2024 following the surprise rise in the UK Consumer Price Index (CPI) in December. ING economists analyze the outlook for EUR/GBP.
EUR/GBP might struggle to find sustainable support above 0.8600 for now
We expect about 100 basis points of BoE cuts this year. Since we also consider the ECB's rate cut expectations to be too aggressive, we are bullish on EUR/GBP until the end of the year. However, we believe that the recovery in EUR rates will be gradual and that markets will be reluctant to unwind bullish positions in high-yield GBP so close to the December CPI surprise.
Consequently, EUR/GBP might struggle to find sustainable support above 0.8600 for now. The 0.8640 area is where the 50, 100 and 200 day moving averages converge, and could be the next major resistance.
Source: Fx Street
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