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EUR/GBP stands at 0.90 in six to nine months — Rabobank

Debate over the Bank of England’s rate outlook could lead to volatility in GBP crosses through 2023, Rabobank analysts warn. They keep seeing that the crossing EUR/GBP it will move higher, reaching 0.90 in six to nine months.

BOE could turn dovish before ECB or Fed

“One of the big issues in the coming year will be the debate on the likely timing of rate cuts by the big central banks. With the exception of perhaps the BOJ, there is a reasonable consensus on the likely timing of rate hikes for most G10 central banks In contrast, there is a wide divergence of opinion on when the first rate cuts might take place, with economists apparently more likely than money market participants to judge that rates could stay higher for longer.

“There is speculation in the UK press that the Bank of England will cut rates before the end of the year. Although we do not subscribe to this view, the discussion of the BoE’s rate outlook could certainly create volatility in currency crosses.” GBP this year.”

“The fact that the UK is already in a Recession that the BdE says could last all year suggests that the GBP is likely to be sensitive to expectations that the BdE could turn dovish before the ECB or the Fed. Even if the BoE has good reason to step up its dovish tone, there were several instances last year where this did not boost the GBP, given the backdrop of weak investment growth, low productivity and uncertainties about the Fed’s ratio. UK with the EU after Brexit”.

“We maintain the view that EUR/GBP will creep to 0.90 on a 6-9 month outlook.”

Source: Fx Street

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