Whither EURGBP if/when BoE and ECB diverge?
The February decisions by the ECB and BoE (next week’s inflation report included) may put clear daylight between the respective guidance of the two central banks. If expectations of tighter relative policy by the BoE are confirmed, further EURGBP
downside will likely remain a consensus view. While sympathetic to the direction, we stress that policy divergence in itself is not sufficient to guarantee the stated price action. Policy transmission and external factors will be just as important.
Read the full report: UBS