EUR/GBP to lurch higher towards 0.86 by year-end – Rabobank

Economists at Rabobank expect EUR/GBP to edge higher as the market unwinds Bank of England (BoE) interest rate hike expectations. This view is caveated around the outlook that the eurozone will avoid energy blackouts and stagflation.

Scope for upside pressure in EUR/GBP in the coming months

“It has been our view for some time that the BoE would run out of road for tightening well before the market has been expecting. Headlines regarding the cost of living crisis in the UK appear to vindicate our view. If the market unwinds its expectations regarding central bank tightening in the UK, GBP will be vulnerable.”

“It is our central view that EUR/GBP can push higher into the middle of the year and beyond. That said, this view is caveated around the outlook that the durozone will avoid energy blackouts and stagflation.”

“Our three-month EUR/GBP forecast stands at 0.84. We expect EUR/GBP to move to 0.86 around the end of the year.”