5 Mar 2015
EUR/GBP looks to extends the current bearishness – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior FX Currency at Rabobank, sees the cross prolonging its descent following the divergence in monetary policies from the BoE and ECB.
Key Quotes
“At the start of this year UK money market rates were pushing out expectations for a UK rate hike into June 2016 and BoE Governor Carney has responded by signalling that the dovish outlook may have extended too far”.
“In his opening remarks in the presentation of the February Inflation Report, Carney chose not to linger over staff estimates that UK CPI inflation could potentially turn negative in the spring”.
“Instead he chose to emphasise the “stronger underlying dynamics which will determine UK output and inflation tomorrow”.
“Even though UK election uncertainty suggests that the sterling crosses could be facing a volatile period, the attraction of the pound has been underpinned by low levels of yields across much of Europe”.
“This differential could be emphasised further by speculation that the ECB could find it difficult to find sellers of bonds as it launches its QE programme. We continue to expect EUR/GBP to trend lower”.
Key Quotes
“At the start of this year UK money market rates were pushing out expectations for a UK rate hike into June 2016 and BoE Governor Carney has responded by signalling that the dovish outlook may have extended too far”.
“In his opening remarks in the presentation of the February Inflation Report, Carney chose not to linger over staff estimates that UK CPI inflation could potentially turn negative in the spring”.
“Instead he chose to emphasise the “stronger underlying dynamics which will determine UK output and inflation tomorrow”.
“Even though UK election uncertainty suggests that the sterling crosses could be facing a volatile period, the attraction of the pound has been underpinned by low levels of yields across much of Europe”.
“This differential could be emphasised further by speculation that the ECB could find it difficult to find sellers of bonds as it launches its QE programme. We continue to expect EUR/GBP to trend lower”.