GBP: Sterling Benefits from Euro Weakness, EUR/GBP to Face Further Downside
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GBP: Sterling enjoys the travails of the euro
Having traded as high as 0.87 last week on the back of the softer UK CPI data, EUR/GBP is now back at 0.8570. This is entirely a euro-driven move and does not represent some bullish re-appraisal of sterling's prospects. Indeed, the UK calendar looks very light until the Bank of England (BoE) rate meeting on August 3rd. Here, the market is now pricing 33bp of tightening in the policy rate, down sharply from the 50bp of tightening that was priced in mid-June.
Given that we are mildly negative on the euro going into tomorrow's ECB meeting and that UK rates might be dragged higher by US rates later today, we would say EUR/GBP could have a little more downside to the 0.8520 area over the next couple of sessions.
