EUR/GBP has moved down to the 0.86 level. Economists at ING analyze the pair’s outlook.

EUR/GBP can slip further this week

The week’s highlight is Wednesday’s parliament testimony by Bank of England (BoE) Governor Andrew Bailey and Friday’s monthly GDP figures for November. Overall, we expect a generally positive impact on Sterling, especially in the crosses such as EUR/GBP, as Bailey may keep signalling a more cautious tone compared to the market on rate cuts and growth should bounce back in the November print.

As the year started, we had called for a return to 0.8600 in EUR/GBP. Now, there is probably some further downside room as BoE rate expectations appear more flexible to a hawkish repricing than the ECB ones, at least in the near term. That said, these are attractive levels to play a longer-term bullish view on the pair based on a deterioration of UK economic conditions and consequently more aggressive cuts by the BoE than the ECB.