EUR/GBP briefly dipped below 0.8500 on the release of weak Eurozone PMIs, to rebound to 0.8565 on the release of weak UK Services PMIs. ING economists analyze the outlook for the pair.
Short-term rates remain the key factor
Weak UK data took 15 basis points off the Bank of England’s (BoE) tightening cycle prices. We continue to believe that the Bank of England will not meet the 60 basis points of tightening that is still being considered in the markets and that the EUR/GBP could return to the 0.87 area by the end of the year.
The only UK data of interest is CBI retail sales for August, and we suspect EUR/GBP to continue trading in a 0.8500-0.8550 range, while GBP/USD is also stable near 1.2700.
Source: Fx Street
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