The pound did some catch up work, joining the euro in its falls. What are the prospects for both currencies?
The team at RBS sees more downside for both currencies and they explain here:
Here is their view, courtesy of eFXnews:
The downward pressure on Eurozone rates, which is likely to intensify if the ECB is able to increase its balance sheet via its QE measures including ABS purchases that are set to begin next week, is keeping the EUR down, notes RBS.
“Eurozone CPI data is revised and Q3 GDP data are released on Friday. Ahead of that CPI data are set to be updated in most Eurozone countries today. CPIs have already been released in Portugal (0.1%y/y, 0.3% expected) and Greece (-1.8%y/y, -1.0% expected) suggesting the risk is that the Eurozone CPI data are revised lower (from 0.4%y/y headline and 0.7%y/y core),” RBS adds.
“We continue to see more downside for the EUR,” RBS projects.
Foe GBP, RBS notes that it has fallen to new lows, in line with a 5bp further fall in its yields across the curve after softer than expected employment data and a Bank of England inflation report that appeared to endorse market pricing of a later start date for rate hikes towards late 2015 by leaving its long term inflation forecast little changed.
“There is every reason to see the timing of rate hikes in the UK continue to slide further behind the US. Given the drag from an expected weaker EUR, weak growth momentum in Europe and stress in Eastern Europe as the conflict in Ukraine rages on, we continue to see more downside in GBP,” RBS argues.
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