ING analysts view EUR/GBP as undervalued by up to 2.8% and expect a rebound to 0.840, citing that current market expectations for Bank of England rate cuts are too aggressive.
ING's model shows EUR/GBP trading 2.6–2.8% below short-term fair value, and the bank sees a return to 0.840 as the most realistic move in coming weeks. Market pricing of three more BoE cuts is viewed as too aggressive, arguing against further sterling strength. This is an analyst view, not a market event, so impact is moderate.
After a hawkish BoE hike, ING expects only limited further tightening and says market pricing for three more cuts is far too aggressive, which argues against further sterling strength against the euro. This is a relative-value call against the euro rather than a dollar-rate view, and hawkish BoE expectations already supported the currency.
ING analyst Francesco Pesole suggests the EUR/GBP pair is trading 2.6–2.8% below its short-term fair value, indicating the recent decline is overstretched. Despite a hawkish Bank of England stance, ING argues that market pricing for three additional rate cuts is overly aggressive, supporting a recovery toward 0.840 in the coming weeks.
ING expects the pair to rise back toward 0.840 in the coming weeks, since it trades around 2.6–2.8% below its short-term fair value.
A euro-specific risk premium linked to French risk has pushed EUR/GBP down, but ING argues the decline looks too stretched even accounting for that.
ING expects the BoE to hike again in February, with some risk of a December move, and considers current market pricing for three further rate cuts too aggressive.