![]() Markets expect that the Bank of England will be forced to concentrate on inflation in the short term, especially after the much higher-than-expected inflation data reported in May. Pound Sterling Outlook: BoE Still Focussing on Inflation GBP/EUR will tend to weaken if the BoE pushes back against market expectations. The determination and ability of the Bank of England and ECB to keep raising interest rates is likely to be decisive over the next few months. Yield trends and central bank expectations will remain crucial for currency markets. Pound Sterling (GBP) posted fresh 9-month highs just over 1.17 against the Euro (EUR) on Friday, before closing slightly lower ahead of the weekend. With regards to GBP/USD, it's expected to find some steadiness around 1.2550-1.2600. "EUR/GBP will increasingly struggle to find more bearish momentum now that markets are already pricing in 100bp of Bank of England tightening and the pair is already in undervaluation territory", says the analyst. This undervaluation has reportedly crossed the lower boundary of the 1.4% - 1.5% standard deviation. The Pound Euro (GBP/EUR) exchange rate opened the new week on currency markets above the 1.17 handle, however, has since slipped below to trade at around 1.167.ĮUR/GBP is now trading under the £0.8600 mark, returning from a modest upturn, with an estimated 2.0% undervaluation in the short term, according to analysis from ING Bank.
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