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Aug 19 - 09:55 AM

GBP/USD, EUR/USD: Balance Of Risks Skewed To The Downside N-Term - MUFG

By eFXdata  —  Aug 19 - 09:07 AM

MUFG Research flags a scope for downside pressure on GBP/USD and EUR/USD in the near-term.

"GBP/USD is now above pre-COVID levels although much of that is USD related. The BoE trade-weighted index remains weaker. That’s a reflection of continued uncertainties like the potential for the BoE adopting negative rates and the outcome of the trade negotiations between the EU and the UK. We don’t believe today’s inflation data alters the balance of risks on negative rates given the disinflationary path that lies ahead. Furthermore, it is worth noting the lead article from the FT this morning is on the prospect of another issue in UK-EU trade negotiations that could scupper the talks. The EU has rejected UK demands for truckers’ access to the EU," MUFG notes. 

"Like with our view on EUR/USD, we see the balance of risks more skewed to the downside given the gains that have been made over recent weeks. The 3mth % increase in GBP/USD is currently around 8% - close to the limit recorded over the last decade," MUFG adds. 

Source:
MUFG Research/Market Commentary

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