6 Apr 2015
UK political jitters could weigh on EUR/GBP – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior FX Strategist at Rabobank, sees the likeliness that political uncertainty regarding the UK elections could undermine EUR/GBP’s performance.
Key Quotes
“While we are not expecting the BoE to change tact and cut interest in order to offset deflationary risks, the drop in core UK inflation does raise the risk that BoE rates could stay low for longer”.
“This year we have been forecasting that the first BoE rate hike is likely to be in February 2016. Currently it seems that the risks in favour of a delay are building”.
“Given that German economic data have been improving, the interest differential that drove EUR/GBP lower between early January and mid March may not widen as far as investors have been expecting”.
“While this change in perceptions may mostly explain the recent correction higher in EUR/GBP, we would add that sterling vulnerability near-term is likely to be exacerbated by the forthcoming May 7 general election”.
Key Quotes
“While we are not expecting the BoE to change tact and cut interest in order to offset deflationary risks, the drop in core UK inflation does raise the risk that BoE rates could stay low for longer”.
“This year we have been forecasting that the first BoE rate hike is likely to be in February 2016. Currently it seems that the risks in favour of a delay are building”.
“Given that German economic data have been improving, the interest differential that drove EUR/GBP lower between early January and mid March may not widen as far as investors have been expecting”.
“While this change in perceptions may mostly explain the recent correction higher in EUR/GBP, we would add that sterling vulnerability near-term is likely to be exacerbated by the forthcoming May 7 general election”.