FXStreet (Edinburgh) – In the view of Jane Foley, Senior Currency Strategist at Rabobank, the cross could drop to the 0.70 region in the next months.
Key Quotes
“The BoE has been clear in its view that the current negative CPI inflation rate in the UK is not set to last”.
“As the impact of the oil price crash falls out of the CPI index towards the end of this year, the inflation rate is expected to rise”.
“The fact that firm UK retail data suggest that the UK consumer is viewing the current period of zero inflation as a temporary opportunity to spend rather than a new normal of persistent deflation, supports the notion that the next move in UK interest rates will be a hike”.
“That said, we see no reason for the Bank to rush and expect steady rates until May 2016”.
“While relief that the UK May general election returned a right-leaning majority government may support business and consumer confidence in the short term, political uncertainty ahead of the EU membership referendum has the potential to weigh on investment and the pound”.
“Also, risk that the July Budget will confirm a front-loading of austerity may also weigh. We expect EUR/GBP to edge only slowly towards the 0.70 level”.
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