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EUR/GBP could test 0.78 in 3m – Danske Bank

FXStreet (Edinburgh) - The cross could head lower to the 0.78 area in response to a potential further appreciation by the sterling, commented Morten Helt, Senior Analyst at Danske Bank.

Key Quotes

“The GBP strengthened against all G10 currencies overnight and EUR/GBP initially dipped below 0.80 earlier this morning, supported by some hawkish comments from Bank of England (BoE) Governor Mark Carney, who in an interview with Sunday Times said that the central bank could hike rates before wages start to increase”.

“Last week the GBP tumbled following the dovish BoE inflation report, in which the bank noted that the weakness in wages is consistent with more labour market slack than previously thought”.

“Last week’s inflation report reduced speculations of an imminent rate hike to the most dovish expectations seen since 12 June, when BoE governor Mark Carney surprised investors with some very hawkish comments saying that rates might rise sooner than the market at that time predicted”.

“Later this week, the minutes from the MPC meeting in July will be released, which will show how the nine members voted. Any indications of a split could signal that a rate hike is moving closer”.

“Despite recent softness in UK data, we expect the UK recovery to remain on track in H2, and we have kept our 3-12M targets for EUR/GBP unchanged and thus still see the cross at 0.78 in 3M, 0.77 in 6M and 0.76 in 12M”.

Czech Republic Consumer Price Index (YoY) remains unchanged at 0.5% in July

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