EUR/GBP bulls need patience

We believethe Bank of England took a step in the direction of an August rate cut last week, even though core policy communication did not change meaningfully, FX Strategist at ING Francesco Pesole notes. GBP looks more likely to display weakness “Markets remain undecided on an August move and in our view, are also still too conservativeon the total easing this year with47bp versus our call for 75bp. Our dovish BoE view means a bearish call on the Pound Sterling , this summer.

We could also see some negative spillover on GBP from the UK election.” “However, political uncertainty currently weighs more on the Euro than on the GBP, and that’s why we think a re-appreciation in EUR/GBP beyond 0.8500 has likely been delayed. We see wide upside room for the pair once the EU political noise has settled due to monetary policy convergence.” “GBP looks more likely to display weakness against the US Dollar in the near term, and we expect a move to below 1.25 in Cable in July.

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