EUR/GBP likely to benefit from a dovish statement from the Bank of England — Danske Bank

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Next Thursday, the Bank of England will announce its decision on monetary policy. Danske Bank analysts they expect the central bank to raise the Bank Rate by 50 basis points. They believe that the cycle will end in March with a rise of 25 basis points. They believe that next week’s dovish statement from the BOE should push the pair up EUR/GBP during the day.

EUR/GBP will rise during the BOE session

“We expect the Bank of England to hike the Bank Rate by 50 basis points on February 2, putting it at 4.00%. Markets are currently pricing 45bp for next week’s meeting. Importantly, we believe the decision is closer between 50 basis points and 25 basis points of what is suggested by market prices and the distribution of analysts’ expectations”.

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“In our baseline assumption of a modest 50 basis point rise, we expect EUR/GBP to decline slightly following the announcement, but reverse higher following a subdued statement and press conference. In its statement, we expect the Bank of England to emphasize the dire state of the UK economy, which would support our claim that market prices are too aggressive and that they currently cap the bank rate at 4.40% for June 2023.”

“Combined with the expectation of a 50 basis point hike from the ECB in the late afternoon, we expect EUR/GBP to rally through the afternoon and end the day above opening levels.”

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Source: Fx Street

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