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According to analysts from Rabobank, the possibility of the Bank of England (BoE) reinforcing a dovish outlook could keep the pound on the back foot. They see the EUR/GBP pair trading around 0.88/0.89 in the months ahead. 

Key Quotes: 

“GBP bulls appeared to be flexing their muscles earlier this month. The pound may not have been keeping pace with the gains in the commodities currencies in the year to date but it was managing to outperform both the USD and the EUR. Already, however, the GBP rally has been thrown off course by bad economic news. Insofar as the pandemic still has a long way to run and the fall-out from Brexit has yet to settle, it is likely that the coming months will remain choppy for GBP. We retain our forecast that EUR/GBP is likely trade in the 0.89/0.88 region in the coming months and may not see a return to the 0.87 level until later in the year.”

“The forthcoming BoE meeting on February 4 may bring some additional colour to the inflation outlook in the UK and potentially to the initial economic impact of Brexit. In view of the recent poor set of UK data releases, fear that the BoE will reinforce a dovish outlook next month could keep GBP on the back foot. In our view, it is still be too early to be bullish on the pound.”