EURGBP to remain elevated in the near-term, but to move lower in the longer-term – Danske Bank
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As expected, the Bank of England (BoE) raised Bank Rate by 75 basis points to 3%. EURGBP initially moved higher. Economists at Danske bank expect the pair to remain elevated for now, but a move back lower is likely in the longer-term.
“In line with our expectation, the BoE hiked the Bank Rate by 75 bps to 3.00% with 7 members voting for a 75 bps hike, one member voting for 50 bps and one member voting for 25 bps. As expected, there was no news in regards to QT-communication as outright selling of government bonds commenced on 1 November.”
“We expect fiscal tightening and recession to weigh on the economy, which in our view, supports a slower hiking pace going forward. We maintain our call for a 50 bps hike in December and 25 bps in February with risks to our call skewed towards additional hikes in 2023.”
“We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.”
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