Sell EUR/GBP this week on BOE/ECB monetary policy divergence – Barclays

Analysts at Barclays offer their thoughts on the EUR/GBP trade in the week ahead, in light of the contrasting views expected from the BOE Governor Carney and ECB Chief Draghi, when they speak at the ECB’s Central Bank Communications Conference on Tuesday.

Key Quotes:

“Major central bank leaders will speak as part of a policy panel organized by the ECB on Tuesday. where we expect a hawkish stance from BoE Governor Gamey to prompt a repricing of BoE Bank Rate expectations and support GBP.

We expect Fed Chair Yellen to reiterate the Central Bank's data-dependent approach to normalizing monetary policy at the ECB event. A constructive message could place upward pressure on short-term interest rates and the USD, but the market may discount the message given her impending departure.

ECB President Draghi and BOJ Governor Kuroda are likely to strike a more cautious tone, with the former emphasizing the need for continued monetary accommodation given that inflation remains well below the ECB's target.

NAFTA renegotiations resume this week, bringing headline risk to MXN and, to a lesser extent, CAD as the US pursues its contentious proposals. AUDNZD should remain in focus, with Australian labor market data likely to confirm still-low wage inflation and modest employment growth.“