7/3/2023 0 Comments Exchange rate for today![]() ING notes a shift in Euro-Zone fundamentals “Headline inflation has continued to come down but remains far off 2%, survey-based inflation expectations have also started to slow, growth has disappointed and confidence indicators seem to have peaked.” ![]() Overall business confidence has tended to deteriorate. The latest revisions reported that the Euro-Zone registered a technical recession with 0.1% GDP declines for each of the last two quarters. The bank adds “We remain of the view that EUR/GBP will increasingly struggle to find more bearish momentum now that markets are already pricing in 100bp of Bank of England tightening and the pair is already in undervaluation territory.” Euro (EUR) Exchange Rates Outlook - ECB Dilemmas liable to Intensify It notes “EUR/GBP has moved back below 0.8600 after a very small rebound and 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.” ING considers that the Pound is notably over-valued at current levels. The latest labour-market data will be released on Tuesday with a notable focus on the wages component within the release. The overall UK data has remained mixed and the next round of major releases will be important. ![]() The BoE will be in a very difficult position if the economic data starts to deteriorate again. That's not a good look for the pound but it should also be no surprise that markets are still pricing close to another 100 basis points of BoE tightening over the coming months to combat price gains.” Growth Developments also Key Shaun Osborne, chief FX strategist at Scotiabank in Toronto, commented "Sticky prices are impacted by high imported items costs. The UK 2-year gilt yield has also increased to an 8-month high just above the 4.50% level.Īccording to the OECD, the UK will have the highest inflation of any leading economy with a 2023 rate of 6.9%, maintaining pressure for BoE action. This has been reflected in market pricing with futures markets now considering that the most likely outcome is for four further BoE rate hikes which would take base rates to a 15-year high of 5.50%. Markets expect that the Bank of England will be forced to concentrate on inflation in the short term, especially after the much higher-than-expected inflation data reported in May. Pound Sterling Outlook: BoE Still Focussing on Inflation GBP/EUR will tend to weaken if the BoE pushes back against market expectations. The determination and ability of the Bank of England and ECB to keep raising interest rates is likely to be decisive over the next few months. ![]() Yield trends and central bank expectations will remain crucial for currency markets. Pound Sterling (GBP) posted fresh 9-month highs just over 1.17 against the Euro (EUR) on Friday, before closing slightly lower ahead of the weekend. With regards to GBP/USD, it's expected to find some steadiness around 1.2550-1.2600. "EUR/GBP will increasingly struggle to find more bearish momentum now that markets are already pricing in 100bp of Bank of England tightening and the pair is already in undervaluation territory", says the analyst. This undervaluation has reportedly crossed the lower boundary of the 1.4% - 1.5% standard deviation. The Pound Euro (GBP/EUR) exchange rate opened the new week on currency markets above the 1.17 handle, however, has since slipped below to trade at around 1.167.ĮUR/GBP is now trading under the £0.8600 mark, returning from a modest upturn, with an estimated 2.0% undervaluation in the short term, according to analysis from ING Bank. Read latest: Pound To Euro Forecast For Week Ahead: Where Next For GBP/EUR Exchange Rate Buyers?.Morgan Stanley sterling outlook: Maintain a long-term bullish bias for EUR/GBP.ING euro outlook: EUR/GBP will increasingly struggle to find more bearish momentum. ![]()
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