Revised down 12-month EUR/GBP forecast to 0.87 from 0.90 – Rabobank

Rabobank analysts note that they have revised down the 12-month EUR/GBP forecast to 0.87 from 0.90 and explain:

Long EUR positions have started to be pared back

“Since the last ECB rate hike in late July, the market has become less sure about the chances of another policy move. While it is likely to be a close call, it has been our view for some time that the Governing Council will stand pat at the September meeting and recent soft economic data have supported this outlook. Germany’s IFO business climate survey highlighted a further deterioration in confidence in August while German and French PMI surveys were shockingly soft.”

“CFTC speculators’ data highlight that net long EUR positions have started to be pared back.  However, net longs remain high from a historical perspective. If the ECB keeps policy on hold next week, the EUR is likely to be vulnerable. This could trigger a move in EUR/GBP towards the bottom of its recent range at 0.85.  Considering the weakness of Germany growth we have revised down our 12-month EUR/GBP forecast to 0.87 from 0.90.