The Pound is set to be the best-performing currency of the first quarter of 2023, having gained 2.5% against the Dollar. Economists at ING think EUR/USD may break 1.10 next week. If that is the case, Cable should follow with a break above 1.25.
No reasons to diverge from EUR
“We have been stressing how markets are rewarding currencies that can count on domestic tightening prospects despite financial turmoil, and the Pound is indeed one of those.”
“While our more dovish view for the BoE compared to the ECB keeps us bullish on EUR/GBP for the remainder of the year (we still target 0.90 in the second half of the year), there aren’t clear short-term drivers to buck the bullish GBP trend at the moment.”
“Cable is approaching some important levels. First of all, the 1.2426 December 2022 high, and then the key 1.2500 benchmark level. With no obvious catalyst driving divergence between EUR and GBP at the moment, a high chance of 1.1000 being tested next week in EUR/USD equals a high chance of 1.2500 being tested next week in Cable.”
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