EUR/GBP: Potential for a corrective rebound - ING

EUR/GBP Poised for a Potential Rebound

Francesco Pesole from ING highlights that EUR/GBP has slipped by approximately 1.5% since tensions involving Iran escalated, a trend supported by a stronger British pound and robust stock markets. Despite this, Pesole believes the recent decline appears overdone when assessed by short-term valuation indicators. With oil prices now dipping below $90, he anticipates a corrective move upward toward 0.870, rather than a continued slide to 0.860.

Recent Decline May Be Overextended

According to Pesole, the EUR/GBP pair remains under pressure, having lost about 1.5% since the onset of the Iranian crisis. This weakness is attributed to a more aggressive repricing of UK interest rates and the ongoing strength in equities, which has limited the typical shift from the pound to the euro.

However, he points out that the downward momentum now seems excessive based on their short-term models. The recent drop in oil prices below $90 could lead to a softer outlook for UK rates, potentially triggering a rebound in EUR/GBP. Pesole maintains a preference for a recovery toward 0.870, rather than expecting further losses to 0.860.

(This report was produced with AI assistance and reviewed by editorial staff.)