30 Apr 2015
EUR/GBP year-end target at 0.70 – Rabobank
FXStreet (Edinburgh) - The European cross could grind lower to the 0.70 region towards year-end, suggested Jane Foley, Senior Currency Strategist at Rabobank.
Key Quotes
“UK CPI inflation may have dropped to zero but on the basis that this is mostly the result of lower energy prices members of the MPC agree that the next policy move is likely to be a rate hike”.
“In view of the aggressive easing policy being followed by the ECB, the interest rate dynamic continues to support the pound and we continue to expect a move towards EUR/GBP 0.70 around the end of the year”.
“However, there are risks to this view. The drop in core UK CPI inflation to just 1.0% y-o-y and the weak trajectory of real wage rises suggest that domestic costs pressures are weak”.
“We have been forecasting the first BoE rate hike in February 2016 but there is the potential that rates could remain low for longer”.
“UK politics may also be an influence. It could take some time to form a coalition government after the May 7 general election, there could be risks regarding the sustainability of the government and the issue of EU membership could become more pressing. Politics and changing expectations regarding the pace of BoE rate hikes could increase volatility in EUR/GBP near-term”.
Key Quotes
“UK CPI inflation may have dropped to zero but on the basis that this is mostly the result of lower energy prices members of the MPC agree that the next policy move is likely to be a rate hike”.
“In view of the aggressive easing policy being followed by the ECB, the interest rate dynamic continues to support the pound and we continue to expect a move towards EUR/GBP 0.70 around the end of the year”.
“However, there are risks to this view. The drop in core UK CPI inflation to just 1.0% y-o-y and the weak trajectory of real wage rises suggest that domestic costs pressures are weak”.
“We have been forecasting the first BoE rate hike in February 2016 but there is the potential that rates could remain low for longer”.
“UK politics may also be an influence. It could take some time to form a coalition government after the May 7 general election, there could be risks regarding the sustainability of the government and the issue of EU membership could become more pressing. Politics and changing expectations regarding the pace of BoE rate hikes could increase volatility in EUR/GBP near-term”.