EUR/GBP to creep higher towards the 0.85 area in the middle of the year – Rabobank

EUR/GBP has regained positive traction on Wednesday. The Bank of England (BoE) policy decision and the European Central Bank (ECB) meeting on Thursday will provide an opportunity for investors to re-evaluate policy expectations. Meanwhile, economists at Rabobank expect EUR/GBP to inch higher towards the 0.85 zone by mid-2022.

Little scope for further BoE moves after spring

“The BoE could follow a 25 bps rate hike this week with another move in May. After that, we see little scope for further moves this cycle. Consequently, we view GBP as being vulnerable in the spring and beyond as the market backtracks on current expectations regarding interest rate settings.” 

“The need for flexibility may lessen the amount of conviction with which ECB President Lagarde pushes back against market expectations for 2022 rate hikes at tomorrow’s post council meeting press conference.”

“We expect EUR/GBP to be creeping higher on a three to six-month view towards the 0.85 area in the middle of the year.”