Economists at Credit Suisse believe sterling’s bullish tone can persist. They stick to a EUR/GBP 0.8400 target, which also allows room also for GBP/USD to test 2018 highs just shy of 1.4400.
EUR/GBP targets 0.8400
“The fact that the SNP got only 48% of the popular constituency vote and even less of the regional list vote has led many to feel that either SNP leader Sturgeon may lack the courage to call a referendum in the near-term or that UK PM Johnson may feel empowered to push back on such demands. As far as we are concerned this issue is now closed as a GBP risk event at least till after the summer.”
“The next few months should see a strong focus on post-pandemic recovery and the rising odds not just that UK growth will be buoyant but that BOE chief economist Haldane’s view of upside inflationary risks linked to bottlenecks and strong consumption will be evident too. It is worth keeping in mind that UK inflation expectations tend traditionally to the higher side of the G10 spectrum despite the BOE having a plain vanilla 2% inflation target. So the risk of a new form of unanchored expectations should likely encourage the BOE to welcome rather than resist offsetting GBP strength.”
“With Johnson having performed well in English regional elections, a sense prevails that the government has momentum at present to push ahead with its plans without great risk of various sleaze allegations surrounding Johnson creating unanticipated difficulties.”
“We stick to a EUR/GBP 0.8400 target for now, which also allows room also for GBP/USD to test 2018 highs just shy of 1.4400.”
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