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EUR/GBP rebounds as ING flags pound overvaluation risk
ING expects EUR/GBP to drift back toward 0.870 by end-summer, citing aggressive Bank of England tightening pricing and upcoming UK political change.
ING strategist Francesco Pesole says the GBP rally has stalled and that EUR/GBP has rebounded after a break lower, with the cross trading around 0.850 and still about 1.5% below ING’s short-term fair value model.
Pesole expects EUR/GBP to return toward 0.870 by the end of summer, but warns the pound faces risk from near-term factors including market positioning adjustments and the attractiveness of carry trades that may have helped drive GBP strength.
The strategist also points to heightened uncertainty tied to UK politics, noting that Andy Burnham is set to become UK Prime Minister next week, which he says could conflict with the pound’s short-term valuation.
FXStreet also cites ING’s view that pricing for Bank of England tightening is too aggressive, with the market currently around 35bp of tightening by year-end, and ING’s stance described as a hold on the pound outlook.