ING’s Francesco Pesole writes that EUR/GBP volatility has reflected shifting rate differentials, but Bank of England (BoE) pricing may fall faster than for the European Central Bank (ECB) . With the BoE seen as ready to cut before the war and the United Kingdom (UK) facing the largest OECD growth hit from the energy shock, ING keeps an upside bias in EUR/GBP and a 0.8800 target.

BoE seen more vulnerable than ECB

"EUR/GBP faced upside volatility on the back of a tightening rate differential yesterday, but is coming back a bit lower after this morning’s drop in ECB pricing."

"Aside from Bank of England officials sounding a bit less hawkish in off-meeting comments, two notions can help the dovish repricing be deeper in the UK than the eurozone."

"First, the BoE was ready to cut before the war started. Second, the growth impact on the UK from the energy shock is expected to be the largest among OECD countries – a dovish argument."

"We retain a bias to the upside for EUR/GBP on the back of that, and our expectations that the whole of BoE tightening will also be priced out."

"In our view, 0.8800 remains a realistic target."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)