Divergences in monetary policies weigh on EUR/GBP – Danske Bank

By FXstreet.com | August 22, 2014 AAA

FXStreet (Edinburgh) - Morten Helt, Senior Analyst at Danske Bank, sees potential for further downside in the cross.

Key Quotes

“In its August inflation report, the Bank of England (BoE) highlighted that the amount of slack in the labour market, remains substantial, equivalent to around 1% of GDP”.

“The amount of slack remains an important factor in respect of timing the first rate hike and given the weak development in wage growth, the likelihood of a rate hike in 2014 has declined substantially”.

“All in all, however, the BoE is clearly on a very different path for monetary policy versus the ECB”.

“While the timing of the first BoE rate hike remains uncertain and will largely depend on the development in the labour market (wage growth in particular), the BoE is clearly on a very different path for monetary policy versus the ECB”.

“Hence, the case for a lower EUR/GBP, driven primarily by a divergent monetary policy outlook, remains intact and we target EUR/GBP at 0.78 in 3M (0.80), 0.77 in 6M (0.79) and 0.76 in 12M (0.77)”.

comments powered by Disqus
Related Forex Analysis
  1. NZD/USD Rebounds After Piercing Line Pattern Offered Bullish Signal
    Forex News

    NZD/USD Rebounds After Piercing Line Pattern Offered Bullish Signal

  2. GBP/USD Recovery May Lack Fuel Amid Void Of Reversal Signals
    Forex News

    GBP/USD Recovery May Lack Fuel Amid Void Of Reversal Signals

  3. EUR/USD Descent Stalls As A Doji Candlestick Highlights Hesitation
    Forex News

    EUR/USD Descent Stalls As A Doji Candlestick Highlights Hesitation

  4. USD/JPY recovered from Asian lows at 108.55, but still under pressure
    Forex News

    USD/JPY recovered from Asian lows at 108.55, but still under pressure

  5. AUD/USD Rebounds After Dragonfly Doji Denoted Indecision At 2014 Low
    Forex News

    AUD/USD Rebounds After Dragonfly Doji Denoted Indecision At 2014 Low

Trading Center