GBP: Liquidity issues & BoE repricing at play – ING

Over recent months, EUR/GBP has tended to sell off on tariff-related headlines, given that the eurozone is far more exposed to US trade than the UK. Yet EUR/GBP surprised yesterday and spiked higher, ING's FX analyst Chris Turner notes.

0.8475 is decent resistance for EUR/GBP

"Two factors are at play, we think. The first is that the euro has better liquidity than sterling and will benefit more as investors leave the dollar. The second is that the looming global trade war is proving the greater leveller for rate spreads."

"The 'exceptionalism' of high UK interest rates is being unwound, where UK two-year swap rates fell 12bp more than their eurozone counterpart yesterday. This may be a dominant theme in the near term."

"0.8475 is decent resistance for EUR/GBP, above which 0.8550 will be the target. Sterling is also a liquid reserve currency so can benefit from the shift away from the dollar. However, GBP/USD has come a long way in a short period of time and may be due some consolidation in the 1.30-32 area."