UK news may help EUR/GBP hold below the March high around 0.8495 – Rabobank

FXStreet Insights Team FXStreet

Today is expected to mark an extraordinary day for Germany. The Bundestag looks set to pass a constitutional amendment that will allow it to ease borrowing restrictions under its debt brake. This should allow for greater spending on defence in addition to setting the stage for a EUR500 bln debt-financed infrastructure fund and allowing the German states to run modest budget deficits, Rabobank's FX analyst Jane Foley notes.

BoE may be able to cut three more times this year in total

"The news, however, is likely already in the price. Since March 4, the EUR has outperformed its G10 peers with the exception of the NOK and the SEK while the DAX is up over 17% in the year to date. In the UK, budget news is also expected today, although this will be of the belt-tightening variety."

"The UK news may help EUR/GBP hold close to current levels and below the March high around 0.8495. However, hopes for a better growth outlook in the Eurozone have altered the dynamic for EUR/GBP. Our year end forecast of EUR/GBP0.83 assumes that UK growth can recover during the course of the year and most recent UK GDP indications have not been encouraging."

"In Rabobank’s view, the BoE may be able to cut three more times this year in total. Unless this is matched by a better growth outlook our expectation of a modest move lower in EUR/GBP this year could be difficult to achieve."

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FXStreet Insights Team

FXStreet

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