ING analysts see potential drop in EUR/GBP below 0.840 By Investing.com

Investing.com -- ING analysts have GKFXrecently discussed the trajectory of the British pound in relation to the euro, noting that the anticipated drop in the EUR/GBP exchange rate has been delayed. The analysis is based on the UK’s April services inflation data, which saw a temporary increase due to higher airfares and package holiday costs around Easter. This effect is expected to reverse shortly.

The report from ING’s UK economist suggests that other significant sectors such as restaurants, medical care, and rents are beginning to show signs of disinflation. Although rent continues to support the overall inflation figure, its influence is predicted to diminish next year. The analysts predict that services inflation will continue to decline over the summer.

Despite high inflation levels being a concern for the Bank of England, ING maintains the outlook that a rate cut in August remains probable. Market reactions to the Consumer Price Index (CPI) release have been tepid, with only a slight retreat in expectations for monetary easing. Consequently, this has provided limited support for the pound’s value.

The current market instability, particularly influences from the US, is believed to be offering support to the EUR/GBP pairing. However, ING analysts still favor the prospects of the exchange rate falling below the 0.840 mark. They indicate that a calmer asset market would likely be a necessary condition for this to occur.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.