EUR/GBP should stay under pressure – TDS

Strategists at TD Securities believe the Sterling is poised for further albeit limited upside in the next weeks.

Key Quotes

“The BoE has pivoted to more traditional monetary policy, with an eye on 2- year-ahead inflation. Wage growth is accelerating toward 3%+ y/y as inflation drifts back toward target, leaving the BoE to hike in May but not again this year. In addition, Brexit remains a sideshow to monetary policy, and the transition deal means that the BoE's "smooth Brexit" base case is playing out, allowing them to hike”.

“The UK curve is priced for a May rate hike but FX markets seem reluctantto embrace a more hawkish BoE. As Brexit tail risks have subsided, we see scope for this to change in the weeks  ahead. We think sterling can see some moderate outperformance against the EUR and other G10 crosses. Our ambition remains limited, however, as sterling continues to face binary political risks”.