EUR/GBP: Any dips to the 0.8250 area could be the low point of the year – ING
|Economists at ING believe that the pound is set to weaken in the second half of 2022 as markets are too aggressive in pricing Bank of England’s (BoE) rate hikes. Subsequently, the 0.8250 level is the lowest the EUR/GBP pair could fall.
Money markets continue to price in 150bp of BoE rate hikes by year-end
“Markets currently price in a 30bp hike at the 5 May Bank of England meeting. The fact that expectations have not shifted towards the 50bp area despite higher inflation is probably down to the same concerns expressed by the IMF yesterday when it cut the 2023 UK growth outlook to 1.2% from 2.3%.”
“Money markets continue to price in 150bp of BoE rate hikes by year-end, while our economics team thinks that it will be closer to 50bp. That would leave GBP vulnerable in the second half of this year and suggests any dips in EUR/GBP to the 0.8250 area could be the low point of the year.”
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