EUR/GBP set to trade towards 0.8550 – Credit Suisse
|Analysts at Credit Suisse discuss EUR/GBP outlook.
Sonia futures already price GBP as being a stand-out G10 high yielder by December
With spot now through our original, long-held EUR/GBP target at 0.8700, we now look for the pair to trade towards 0.8550.
Sonia futures already price GBP as being a stand-out G10 high yielder by December at a terminal rate around 5.50%, a rate reached by the BoE hiking by 25 bps at each of the next 4 meetings. While we think this is probably enough given the data flow and the BoE’s typically slow and deliberate approach, the simple fact that GBP will likely enjoy a material yield premium over the EUR for the far foreseeable future is likely still being digested after so many months of GBP having been a favourite market short. This is what allows for further EUR/GBP downside momentum towards our target.
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