Forex
Home›Forex›Major Pairs›EUR/GBP holds near 0.8600 as BoE wait-and-see weighs o…
EUR/GBP holds near 0.8600 as BoE wait-and-see weighs on GBP
The Bank of England has kept its benchmark rate at 3.75%, while strategists say swaps imply about 100 bps of further BoE hikes to 4.75% over the next 12 months.
EUR/GBP was trading flat around 0.8600 on Friday, and was set for a weekly gain as the Bank of England’s wait-and-see stance weighed on the British pound, FXStreet said.
The BoE has stayed on hold so far this year, leaving its benchmark rate unchanged at 3.75% at the most recent meeting, a move that left it lagging the Federal Reserve and the European Central Bank in raising rates.
FXStreet noted that Brown Brothers Harriman strategists pointed to a gap between market expectations and their view of the UK policy outlook. They said the swaps curve implies about 100 bps of BoE rate hikes in the next 12 months to 4.75%, but argued the BoE may not need to tighten as much as markets expect.
The strategists cited that the UK economy is already operating below capacity, that 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range, and that fiscal policy is likely to turn more restrictive, supporting a lower-for-longer policy path than current pricing.