GBP: ECB vs. BoE Story Dominates as Dovish Sentiment Sparks Rate Cut Expectations

GBP: ECB vs. BoE story dominates

GBP: ECB vs. BoE story dominates

Dovish commentary from the ECB has now seen investors pricing ECB rate cuts several months ahead of the Bank of England (BoE) next year and expectations build of a deeper easing cycle in the Eurozone than in the UK. We disagree with that pricing and think the BoE will deliver more hikes than the ECB next year. This probably means that EUR/GBP does not need to spend too much time below 0.8600. Indeed, 0.8500 represents very strong support and we remain happy with our forecasts of EUR/GBP edging up to the 0.88/0.90 area into next year.

The UK data calendar is very quiet this week, with just Friday's release on inflation expectations of note. The bigger driver of EUR/GBP this week will be any ECB pushback against dovish pricing of their 2024 policy cycle.

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Topics

forex uk ecb forex trading monetary policy boe interest rates eur/gbp eurozone exchange rates economic data Central Banks economic outlook market sentiment rate cuts inflation expectations market pricing monetary easing currency analysis

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