UK growth is set to stagnate but recession narrowly averted. Regarding the EUR/GBP, Kit Juckes, Chief Global FX Strategist at Société Générale, expects the pair to correct lower toward 0.8750.
Series of EUR/GBP higher highs being followed by largish corrections continues
“Tomorrow we’ll get UK Q4 GDP data, with a consensus at zero which dodges recession but doesn’t feel great. That sums up the UK.”
“Sterling has had a lift and the series of EUR/GBP higher highs being followed by largish corrections, continues. Maybe we correct to 0.88 or even 0.8750 before the uptrend resumes.”
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The euro-pound exchange rate may be headed for a period of market correction before continuing its current uptrend, according to a research analyst at Société Générale.
The current turnaround of EUR/GBP began in late June and has helped the pair rise nearly 5% since then. SocGen’s research analyst believes this uptrend could be interrupted during the short-term and the EUR/GBP rate could correct by reaching as low as 0.88 or even 0.8750 before the trend resumes its upward trajectory.
The analyst’s report cites a number of factors that could contribute to EUR/GBP’s short-term dip in the markets: speculations about the Bank of England’s possible tapering of quantitative easing measures, economic uncertainty in both the U.K. and Europe, and investors’ reactions to a recently proposed trade agreement between the U.K. and the U.S..
Overall, despite the possibility of a short-term decline, the analyst’s report remains positive about the long-term prospects for EUR/GBP and believes that the pair could eventually reach or even surpass its 2018 high of 0.92 in the near future.
The report notes that a continued appreciation of the euro thanks to ongoing European Central Bank stimulus measures, a strengthening of the U.K.’s economy as it adjusts to post-Brexit realities, and an improving trade outlook as the U.K.’s negotiations with other countries advance could all lead to substantial gains in the EUR/GBP pair over the coming months.
Ultimately, while a correction of the current uptrend appears plausible in the short-term, the underlying outlook remains positive for the euro-pound exchange rate and suggests an eventual return to its previous highs.
