EUR/GBP has declined to the lower end of the 0.86-0.87 range. Economists at MUFG Bank analyze the pair’s outlook.
Risks are skewed to the downside
The market is now priced for the BoE to cut by 25 bps in August next year which is later than both the ECB and the Fed.
The shift in thinking on the ECB given the recent evidence of faster declines in inflation does leave EUR/GBP open to further falls as a divergence in inflation and therefore policy expectations widens further.
EUR/GBP has dropped through its 50, 100 and 200-DMAs in the last five trading days and risks are skewed to the downside for now.
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