It’s been a quiet week in the UK calendar, but the weak economic indicators out of the eurozone have dealt a blow to EUR/GBP, ING’s FX strategist Francesco Pesole notes.

GBP/USD may start to look expensive soon

“We saw the pair test the 0.8320 level earlier this week, and while we continue to see a good case for a rebound beyond the short term as Bank of England easing may be underpriced, we probably need some inflation surprise in the eurozone to prevent 0.8300 to be tested soon.”

“The EUR:GBP swap rate differential collapsed as markets increased bets the eurozone’s grim outlook will force the ECB into larger cuts than the BoE, and is now at -155bp, the widest since December 2023. That should keep some pressure on the pair in the near term.”

“In cable, the fresh 1.34 highs are also justified by the policy rate differential, although expectations for a 50bp Fed cut may be misplaced, and GBP/USD may start to look expensive soon.”