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As monetary policy divergence is coming to focus with rate hike signal from Bank of England (BOE), Pound is likely to gain further against Euro.
BOE governor Mark Carney has clearly signaled this month that if current economic conditions prevail, BOE stands ready to seriously consider rate hike at turn of the year. As of now, a first quarter rate hike from BOE seems very much likely.
On the other hand, European Central Bank (ECB) is likely to keep its ultra-loose monetary policy in place at least till September 2016. We at FXwirePro believe that ECB might have to even extend its asset purchase program.
With such divergent monetary policy and economic growth fundamentals Euro is likely to underperform against pound.
However one contrarian problem exists, since the trade is too obvious.
Trade idea -
- Keep the Euro short against Pound, with 0.65 area as target and 0.72 area as stop. 0.716 area stands as interim resistance.
- Euro is currently trading at 0.706 against pound.
