Mon. May 20th, 2024
EUR/GBP COULD BREAK BELOW 0.85 THIS YEAR EUR/GBP COULD BREAK BELOW 0.85 THIS YEAR 

EUR/GBP to dip to 0.84 in the second half of 2024

“It has been our view for some time that EUR/GBP could break below the 0.85 level this year.

This view is based on the forecast of a slower start to BoE rate cuts.

It also assumes that the UK election, which is expected before the end of the year, is unlikely to create many shockwaves.

Opinion polls strongly suggest that a Labour government will be entering Downing St after the election.

While the shadow cabinet has kept its cards close to its chest in terms of policy details, the Starmer leadership has been keen to woo the business sector.

Additionally, the poor state of public finances suggests little room for manoeuvre for the new Chancellor.

The latter implies that the election could be a reassuringly boring event for markets.”

“The weeks and months ahead could bring more geopolitical induced volatility for asset prices and in particular for the safe haven USD.

This risk, combined with the resilience of the US economy, suggests a strong probability of further dips in the value of GBP/USD. EUR/GBP, however, should be less impacted.

We continue to expect that EUR/GBP will dip to the 0.84 level in the second half of this year. That said, the EUR/GBP0.8530 level is likely to offer near-term support.”

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