EUR/GBP will increasingly struggle to find more bearish momentum – ING

EUR/GBP has moved back below 0.8600. Economists at ING analyze GBP outlook.

EUR/GBP is undervalued

We estimate the pair to be trading at around a 2.0% short-term undervaluation at the current levels, which falls beyond the 1.4% 1.5 standard-deviation lower-bound.

We remain of the view that EUR/GBP will increasingly struggle to find more bearish momentum now that markets are already pricing in 100 bps of BoE tightening and the pair is already in undervaluation territory. 

On the Cable side, we expect some stabilisation around 1.2550-1.2600.