BUYING EUR/GBP WHEN IT GETS CLOSE TO 0.8500 – SOCGEN

EUR/GBP has bounced off 0.8500, again. Economists at Société Générale analyze the pair’s outlook. 

GBP, along with CHF, will be a favourite European currency short

Repeated attempts by EUR/GBP to break below 0.8500 have failed this year, with the Pound finding support from higher BoE interest rates and the market’s expectation that the UK may cut rates by slightly less than the ECB this year.

With both economies stagnating, the strongest argument for the UK to cut by more is that higher rates give more room to act when inflation is deemed low enough to do so. 

We will continue to recommend buying EUR/GBP when it gets close to 0.8500, and GBP, along with CHF, will be a favourite European currency short.