- EUR/GBP hit multi-year lows for a second consecutive session under 0.8330 but has since rebounded back towards 0.8350.
- Analysts caution that there are a lot of positive in the price of GBP.
EUR/GBP hit multi-year lows for a second day running on Tuesday, briefly slipping below Monday’s 0.8332 low to bottom out at 0.8323 before rebounding in recent trade back towards 0.8350. At current levels in the 0.8340s, the pair trades flat on the day. ECB speak from President Christine Lagarde and Chief Economist Philip Lane was ignored on Tuesday as neither provided any more information on the policy outlook, enabling EUR/GBP traders to continue to focus on the overarching theme of ECB/BoE divergence. On which note, markets are pricing a strong likelihood that the latter will hike rates by 25bps in February thus further extending the UK’s rate advantage over the Eurozone, a theme which continues to weigh on the pair, FX strategists say.
Analysts at Commerzbank warn that while the prospect of interest rate hikes from the BoE has been supporting GBP, “quite a bit of it is likely to be priced in already so that the GBP rally could begin to run out of steam”. Analysts at Rabobank caution that the market, which has been expecting as many as four BoE rate hikes this year, may soo start to unwind some of the hawkish expectations, with pressure on real incomes in the UK likely to “become more obvious as the winter progresses”. For now, EUR/GBP bearish speculators will likely continue to target a test of late-2019/early 2020 lows in the 0.8280s area. The main data points to keep an eye on include Eurozone November Industrial Production figures on Wednesday and UK November GDP figures on Friday.
