Cable has managed a remarkable recovery over the course of recent sessions. However, over the coming months, economists at Rabobank expect that UK growth risks and a buoyant USD will be significant headwinds for the pound.
EUR/GBP: Potential for a gentle move towards 0.86 into the summer
“Textbooks suggest that the prospect of a more aggressive interest rate cycle from the Bank of England (BoE) is a positive near-term factor for the pound. However, insofar as this would increase the likelihood of a hard landing for the UK, upside potential for GBP on more rate rises could turn out to be limited.”
“For cable, we see risk of another attempt back down to recent lows based in part on UK growth concerns but also on the back of USD strength.”
“On the back of growth risks in China, energy security concerns in Europe and a hawkish Fed we see the prospect of a stronger for longer performance by the safe-haven USD.”
“In anticipation of a July interest rate rise from the ECB, we see the potential for a gentle move towards EUR/GBP 0.86 into the summer, though upside potential in the currency pair is likely to be limited into year-end in view of recessionary risks faced by the eurozone.”
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