EUR/GBP: Difficult to see a catalyst for a significant break lower – Rabobank

In the view of economists at Rabobank, cable could continue to struggle in the coming months assuming that the USD remains on the front foot while EUR/GBP can creep towards the 0.84 level on a 6 month view. This assumes there is sufficient improvement in the economic backdrop to remove a little caution from the Bank of England’s outlook. 

Further sideways trading for EUR/GBP

“Although there is evidence that the vaccination programme has significantly diluted the link between vaccination and hospitalisation, this has the potential to impact consumer confidence and activity. This is likely to underpin the BoE’s cautious tone and its central expectation that this year’s spike in CPI inflation will be transitory. As such, we expect steady rates from the Bank until 2023.”

“Although the scheduled completion of the Bank’s QE programme at the end of the year could provide GBP some support, it could take some time for EUR/GBP to find the incentive to break lower.”

“UK monthly May GDP and production data due later this week may provide a little fresh direction for the pound.”