EUR/GBP finding traction post Central Banks

By FXstreet.com | August 07, 2014 AAA

FXStreet (Guatemala) - EUR/GBP is trading at 0.7931, down -0.13% on the day, having posted a daily high at 0.7957 and low at 0.7924.

EUR/GBP has recovered a little ground post the drop from the mid point of the handle. Today we had both of the Central Banks and what we has been reconfirmed is that there will be divergence between the banks for some considerable time. Analysts at Rabobank explained that the ECB is trying to squeeze everything possible out of its forward guidance and ensure that the Transatlantic decoupling does not go into reverse. “The rationale behind this is simple: it’s the most “cost-effective” of all policies and it helps the ECB buy time before it has to decide about any further measures”.

BoE surprised with the markets expectations

In respect of the BoE, James Knightley, ING Bank, explained that they favour a November rate hike from the BoE with very slow and steady additional tightening of perhaps 25bp per quarter thereafter. “Indeed, we have to remember the comments from the June BoE minutes stating that they were surprised about the low probability the market was attaching to a rate rise before year-end. The risks to this view are that sterling strengthens more aggressively than we anticipate, which is also linked to the potential for a weaker Eurozone backdrop and a vote in favour of Scottish independence, which would likely lead to market volatility and economic uncertainty”.

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