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Euro Cross Pick 11.09.2012

Euro Cross Pick 11.09.2012

David Song, Strategist

As forex traders turn their attention to the Bank of England (BoE) quarterly inflation report on tap for the following week, the revised forecast from the central bank is likely to have a major impact on the British Pound, and we will be closely watching the EURGBP in the days ahead as the pair resumes the downward trend from earlier this year. Indeed, we will maintain our bearish outlook for the euro-pound as the BoE appears to be moving away from its easing cycle, and the deviation in the policy outlook should pave the way for further declines in the exchange rate as market participants see the European Central Bank targeting the benchmark interest rate in the coming months. As a result, we will look for an opportunity to sell the EURGBP in the days ahead, and we anticipate to see fresh yearly lows in the exchange rate as the fundamental outlook for the euro-area deteriorates further.

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