Forex Flash: GBP to weaken further – Rabobank

The sterling would face renewed pressure this week, as the BoE MPC would hold its monthly gathering. Although market consensus expects the lending benchmark and the Gilts purchases to remain unchanged at 0.5% and £375 billion, respectively, the speech by the next BoE Governor M.Carney would grab all the attention, as he favours moving to a nominal GDP target in order to spark the recovery in the UK economy.

“Whether the Bank does go down this route under the leadership of Carney depends to a large extent on the performance of the domestic economy over the next 12 mths or so”, expressed Jane Foley, Senior FX Strategist at Rabobank.

According to Foley, the renewed confidence in the euro zone plus increasing inflows into the single currency have been the main deterrents to further GBP strength. “Although pullbacks are likely along the way, we expect that EUR/GBP will end the year back in the 0.88 – 0.89 area, where some congestion is likely… We expect cable to push towards the 1.55 area on a 6 mth view”.