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May 28 - 06:55 PM

ING: Potential for EUR/GBP to Climb from Current Levels

By eFXdata  —  May 28 - 03:00 PM

Synopsis:

ING discusses the potential for a rise in EUR/GBP from current levels, emphasizing the influence of monetary policy divergence between the European Central Bank (ECB) and the Bank of England (BoE). Despite recent dovish comments from the ECB and upbeat risk sentiment, ING sees a favorable setup for EUR/GBP due to shifts in monetary policy expectations.

Key Points:

  • Monetary Policy Divergence: The primary driver for EUR/GBP remains the monetary policy divergence between the ECB and the BoE. ING anticipates this divergence may soon favor the euro, supporting a potential rally in EUR/GBP.
  • Current Market Dynamics: After touching lows below 0.8500, EUR/GBP showed resilience, suggesting the market is hesitant to drive the pair lower amid a split BoE MPC and volatile inflation and wages data.
  • Political Influence: The upcoming UK political developments, particularly any campaign statements from Labour Party leader Keir Starmer, are monitored but have yet to impact the market significantly.

Conclusion:

With a relatively quiet UK economic calendar this week, EUR/GBP's movements are likely to be influenced more by shifts in policy expectations rather than immediate economic data or political comments. ING maintains a view that upcoming economic indicators will bolster the case for a BoE rate cut in August, potentially driving EUR/GBP higher in the near term.

Source:
ING Research/Market Commentary

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