EUR/GBP to slip below 0.83 with the BoE in dynamic tightening mode – ING

The Bank of England (BoE) is set to hike its policy rate by 25 basis points to 0.5%. With the “Old Lady” well ahead of the European Central Bank (ECB) in a tightening mode, economists at ING expect the EUR/GBP pair to trade below the 0.8300 level.

A 25bp hike from the BoE

“The baseline view assumes an 8-1 vote for a 25bp rate hike - taking the Bank Rate to 0.50%. We are also interested in the BoE's inflation report and its forecast as to whether CPI is on target in two years' time using the market's very aggressive pricing (1.50% Bank Rate early next year) into account. This is where the BoE would have an opportunity to present a rate protest.”

“Also, today expect much local focus on the energy regulator announcing the size of the regulated energy price increases for April. This will add to the view that UK inflation is heading close to 7% YoY in April – and that a strong pound can insulate against further energy price increases.”

“With the BoE in dynamic tightening mode (and well ahead of the ECB), expect EUR/GBP to trade down to 0.8300.”

See – BoE Preview: Forecasts from 12 major banks, another rate hike