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Citigroup has suggested fair value on EUR/GBP is closer to 0.8550 and that sterling is pricing in a lot of good news; however we would stick by our call to potentially sell at 0.8480.
In European trade we saw ECB member Joerg Asmussen suggest it was ‘too early to start the exit’ in the eurozone, which caused EUR selling, while there were further concerns about Italian politics, although the Italian ten-year bond only gained one basis point.
In upcoming trade we get the latest read on UK jobs, with the jobless claimant count due and the market expects a drop here of 21,000 jobs. A weaker number than expected could push the pair higher, however the real kicker could come on Thursday when Mark Carney and a number of other BoE members are due to speak in London. Given the ten-year gilt is trading above 3%, they could use this forum to push back on rate hike expectations and thus sterling could fall, pushing the pair to our proposed limit.
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