Synopsis:

Danske Bank observes a stable trading pattern for EUR/GBP around the 0.87 level following the Bank of England's (BoE) latest policy meeting. Chief Economist Huw Pill's dovish remarks suggest a market alignment with the anticipated rate cut in August 2024, and a cautious approach to avoiding a prolonged restrictive policy that could precipitate a recession.

Key Points:

• Dovish BoE Communication: The BoE's dovish tilt, as expressed by Huw Pill, points to an openness towards an earlier-than-expected rate cut.

• Adjusted Market Expectations: The market has slightly adjusted its expectations for the upcoming December meeting, with a lean towards a lesser rate hike.

• Forecast for EUR/GBP: Despite the near-term stability, Danske Bank forecasts a modest decline in GBP towards 0.89, anticipating divergent economic outlooks between the Eurozone and the UK.

Conclusion:

Danske Bank maintains a near-term neutral perspective on EUR/GBP, expecting the pair to trade within a narrow range. However, the longer-term view suggests a potential weakening of the cross due to the diverging economic paths of the Eurozone and the UK, underscored by the recent dovish discourse from the BoE.