ING Research discusses its expectations for the BoE policy trajectory and EUR/GBP near-term outlook.
"EUR/GBP remains on the lows at 0.8500, largely on the view that the BoE will be more responsive to inflation than the ECB. Currently the market prices about 5bp of tightening at the November BoE meeting and 25bp by the February meeting next year. We think that is too aggressive, but the BoE has yet to disavow the market of these expectations. Perhaps the BoE is welcoming the benefits of a stronger GBP in insulating against higher energy prices?," ING notes.
"For the time being, we would back GBP, although it seems unrealistic to expect EUR/GBP to break below the 0.8450/8470 just yet," ING adds.