ING economist Chris Turner reports that EUR/GBP remains offered despite significant declines in UK short-dated interest rates, with technical support clearly defined at the 0.8600/0.8620 level. Turner notes that both ING and the broader market expect this support zone to hold, a sentiment echoed in the FX option market where the EUR/GBP one-month risk reversal remains bid at its recent highs of 0.8% [1].
Turner highlights that the bar for a Bank of England (BoE) rate hike is exceptionally high, given the already restrictive policy rate. He suggests that softer UK activity data, particularly a notable drop in the March flash UK PMIs, could weigh on sterling and potentially ease BoE tightening expectations [1]. Despite these concerns, Turner cautions that comments from BoE arch-hawk Huw Pill, expected at 14:30 CET, could influence market sentiment if Pill signals support for an April rate hike [1].
The baseline scenario from ING assumes that the 0.8600/0.8620 support zone will contain any downside in EUR/GBP, indicating a degree of stability in the currency pair despite recent volatility in UK rates and economic data [1].
CONCLUSION
ING expects the EUR/GBP support zone at 0.8600/0.8620 to hold, even as weak UK PMIs and uncertainty around BoE policy weigh on sterling. Market sentiment remains cautious, with technical and options data suggesting stability in the currency pair. The outcome of BoE commentary and further economic data will be key to future moves.