17 Mar 2015
EUR/GBP breach of 0.70 likely in H2 15 – RBS
FXStreet (Barcelona) - Paul Robson of RBS, views that with ECB expected to ease for many quarters to come, a sustained breach below 0.70 is likely for EUR/GBP in H2 15.
Key Quotes
“Acute policy divergence is seeing significant moves in bilateral exchange rates. EUR/GBP looks particularly out of line with long term valuations as a result. However, short-term drivers (relative monetary policy), particularly Euro area negative interest rates can be a powerful FX driver.”
“The ECB has started QE and there is little sign of buy the rumour, sell the fact. Data may strengthen, but inflation seems likely to stay subdued. The QE Rubicon has been crossed and thus it’s possible morewill come.”
“With ECB policy expected to remain easy for many quarters to come, stretched valuations can be stretched further, with a sustained breach of 0.70 looking increasing likely in H2:15.”
“While risks appear skewed in favour of a lower EUR/GBP, political uncertainty, recent GBP trade weighted gains and a potential delay in BoE tightening if wage inflation is subdued, may slow the decline.”
Key Quotes
“Acute policy divergence is seeing significant moves in bilateral exchange rates. EUR/GBP looks particularly out of line with long term valuations as a result. However, short-term drivers (relative monetary policy), particularly Euro area negative interest rates can be a powerful FX driver.”
“The ECB has started QE and there is little sign of buy the rumour, sell the fact. Data may strengthen, but inflation seems likely to stay subdued. The QE Rubicon has been crossed and thus it’s possible morewill come.”
“With ECB policy expected to remain easy for many quarters to come, stretched valuations can be stretched further, with a sustained breach of 0.70 looking increasing likely in H2:15.”
“While risks appear skewed in favour of a lower EUR/GBP, political uncertainty, recent GBP trade weighted gains and a potential delay in BoE tightening if wage inflation is subdued, may slow the decline.”