EUR/GBP to rise towards 0.86 by year-end as BoE may be close to the top of its tightening cycle – ING
|Sterling fell sharply yesterday after the Bank of England (BoE) signalled a 'rate protest' to market pricing of its tightening cycle. Economists at ING expect the EUR/GBP pair to advance towards 0.86 by year-end.
BoE rate protest hits the pound
“The BoE forecast a UK contraction in 2023 and revised the 2022 peak in inflation. The BoE update also included an implicit 'rate protest' against market pricing of tightening prospects – a measure that hit the pound.”
“Signs that the BoE may be close to the top of its tightening cycle (two of the nine Monetary Policy Committee dissented against further hikes) suggest sterling may be vulnerable as trading partners including the US and the eurozone push ahead with tightening cycles.”
“This month we are raising our year-end EUR/GBP forecast to 0.86 from 0.84. The 200-day moving average near the 0.8450 area may now prove good EUR/GBP support, with a bias towards 0.86 now.”
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