Pound Sterling is testing JPMorgan’s preferred trading range, while ING expects excessive UK rate-hike pricing to unwind.
JPMorgan’s tactical backing for the British Pound against the Euro is being tested as Sterling slips towards its September lows.
The British Pound to Euro exchange rate (GBP/EUR) traded at 1.1621 on Thursday afternoon, down 0.09% following Wednesday’s 0.21% decline.
Pound to Euro (GBP/EUR): 1.162402 (-0.06%)
Pound to Dollar (GBP/USD): 1.321369 (-0.18%)
Euro to Dollar (EUR/USD): 1.136758 (-0.12%)
JPMorgan’s trading desk retained its preference for selling EUR/GBP within the established range on Wednesday:
“Not very exciting but still like playing the 0.85/0.86 EURGBP range from the short side.”
Selling EUR/GBP backs Sterling against the Euro.
That range translates to approximately 1.1628-1.1765 in GBP/EUR, although these are range boundaries rather than dated forecasts.
Thursday’s rate puts EUR/GBP near 0.8605, slightly above the ceiling JPMorgan identified.
Sterling therefore needs to recover ground for the desk’s range view to hold.
GBP/EUR Forecast: ING sees room for UK rate expectations to fall
ING’s broader outlook points towards GBP/EUR near 1.15 in the fourth quarter.
Its 0.87 EUR/GBP forecast converts to 1.1494, roughly 1.1% below Thursday’s price.
In a recent brief ING put November hike odds around 75%, with markets pricing 92 basis points of tightening by June.
“Our economists’ call is still for no rate increase, which results in a bearish GBP outlook as our baseline.”
Even if another oil price jump forces a November increase, ING doubts the BoE will deliver all the subsequent tightening investors anticipated.
Wednesday’s UK PMI release leaves that debate unresolved.
The composite reading fell to 51.7 from 52.5, while services price pressures strengthened.
Pantheon interpreted those figures more hawkishly:
“It’s a hawkish combination for the MPC and keeps a November rate hike on track.”
A November increase alone would not settle the disagreement: ING’s Sterling warning also rests on how many further hikes follow.
Our currency coverage draws on live market data, official economic releases and published bank research.
