British Pound: BoE pricing keeps rangebound against Euro – ING

ING’s Francesco Pesole notes EUR/GBP has held a tight 0.855–0.860 range since early September after a Bank of England (BoE) meeting that did not strongly challenge aggressive market tightening expectations. ING economists still forecast no BoE rate increase, underpinning a bearish British Pound (GBP) view and an anticipated move to 0.870 in EUR/GBP as markets eventually reprice dovishly.

BoE expectations weigh on Pound

"EUR/GBP has traded in a fairly tight range of 0.855-0.860 since the start of September. Last week’s Bank of England meeting was not as hawkish as the ECB or the Fed, but equally failed to really push back against aggressive market pricing for tightening."

"Markets are attaching a large probability of a BoE rate hike in November (c.75%) and a huge 92bp by June. Our economists’ call is still for no rate increase, which results in a bearish GBP outlook as our baseline."

"Even if another oil price jump prompts a November move, it seems unlikely the BoE will match market expectations for further tightening, meaning some large dovish repricing should still occur at some point."

"In the coming weeks, we’ll hear more about the content of the UK October budget. The pound isn’t embedding any fiscal risk premium for the moment. We still expect a move to 0.870 in EUR/GBP on the back of the central bank story."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)