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Dec 16 - 10:55 AM

EUR, GBP: Higher EUR/GBP Ahead On Uber-Hawkish ECB Compared To BoE -MUFG

By eFXdata  —  Dec 16 - 09:39 AM

MUFG Research sees a scope for higher EUR/GBP over the comin weeks.

"The single most important takeaway was for the ECB the sharp increase in the inflation forecast for 2024 (from 2.3% to 3.4%) which was at the root of the hawkish message that the ECB policy rate will have to go “significantly” higher to bring inflation back to target," MUFG notes. 

Gains for the euro versus the higher-beta G10 currencies seems more likely. That would be consistent with market conditions turning more volatile which could be the key consequence of some of these central bank meetings this week. Indeed, following the more cautious message on future rate hikes by the BoE we see scope for further notable gains in EUR/GBP.

"Higher EUR/GBP is also consistent with worsening risk sentiment and higher volatility when EUR tends to outperform GBP," MUFG adds.

Source:
MUFG Research/Market Commentary

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