EUR/GBP to turn higher in 12-month view reflecting sluggish UK fundamentals – Rabobank

EUR/GBP dipped a little lower in the first part of the month. However, economists at Rabobank continue to expect the pair will turn higher in a 12-month view.

There are currently similarities to be drawn between the drivers of both the EUR and GBP

“Unless forthcoming Eurozone economic data surprises on the upside, there may be only a muted reaction to hawkish commentary from ECB officials in the coming weeks. Similarly, the market is also priced for further BoE rate hikes, suggesting there may be limited additional upside for GBP from ongoing hawkish remarks from BoE policymakers. This backdrop is heavily suggestive of range trading for EUR/GBP in the coming weeks.”

“Further out, we retain our forecast that EUR/GBP will grind higher to 0.90 on a 9 to 12-mth view. In that time frame, the market is likely to be focused on the prospect of looser monetary conditions from both the ECB and the BoE. Our expectation of GBP underperformance over the medium term is drawn from concerns over UK growth potential related to labour market shortages and ongoing low investment and productivity growth in the UK.”