Economists at Rabobank analyze EUR and GBP outlook.
UK recession risks to undermine long GBP positions into the final months of the year
We currently see risks to both GBP and the EUR as being well-balanced.
Despite concerns about the stickiness of core inflation in the Eurozone, we see risks that ECB rates have already peaked. In contrast, we expect the BoE to follow an expected 25 bps rate hike this week with another in September. While interest rate differentials would appear to favor the pound, we expect UK recession risks to undermine long GBP positions in the final months of the year.
We expect both GBP and the EUR to give back some ground vs. the USD in the coming months and for EUR/GBP to remain close to recent ranges.
