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EUR/GBP bulls need patience – ING

We believe the Bank of England (BoE) took a step in the direction of a rate cut in August last week, although central policy communication did not change significantly, notes ING FX strategist Francesco Pesole.

GBP seems more likely to show weakness

“Markets remain undecided on a move in August (14bp discounted) and, in our view, also remain too conservative on full easing this year at 47bp versus our forecast of 75bp. Our dovish BoE view means a bearish outlook for the British Pound (GBP) this summer. We could also see some negative effect on the GBP from the UK elections.”

“However, political uncertainty currently weighs more on the Euro (EUR) than the GBP, and that is why we believe that a revaluation of EUR/GBP beyond 0.8500 is probably overdue. We see ample room to upside for the pair once the EU political noise has calmed down due to monetary policy convergence.”

“The GBP looks more likely to show weakness against the US Dollar (USD) in the near term, and we expect a move below 1.25 in the Pound in July. This week’s calendar is very quiet for UK data, and there are no BoE speakers scheduled for now.”

Source: Fx Street

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