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EUR/GBP Rebound Vulnerable to Dovish ECB

EUR/GBP Rebound Vulnerable to Dovish ECB

David Song, Strategist

EUR/GBP extended the rebound from 0.7054 going into the end of May, but the pair remains at risk of facing increased volatility in the week ahead as Greece faces another IMF payment, while the European Central Bank (ECB) and the Bank of England (BoE) are scheduled to announces their interest rate decisions for June.

Market participants may show a limited reaction to the BoE should the central bank refrain from releasing a fresh policy statement, and the key developments coming out of the euro-area may heavily impact EUR/GBP as the ECB pledges to carry out its quantitative easing program until at least September 2016. Even though the Governing Council is widely expected to stick to its current course, President Mario Draghi may continue to highlight a dovish outlook for monetary policy amid the fragile recovery.

With that said, we will keep a close eye on the monthly opening range for EUR/GBP and the key developments coming out in the days ahead may reinforce the long-term bearish outlook for the euro-pound amid the ongoing deviation in the policy outlook.

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