The GBP/EUR cross is up for the second consecutive session, even if it remains near a six-month low.
Having threatened to fall below 1.11 mid-week GBP/EUR has pushed up to 1.115, despite some dovish comments by MPC member Vlieghe and the release of strong Eurozone industrial output data for May. Vliegle, speaking in a Reuters interview, said the Bank of England could its policy rate from 0.75% currently to near zero and that in any case a rate cut was more likely than a rate hike. This dovish stance contrasts with the Bank of England’s more bullish outlook only a few weeks ago. In the Eurozone, industrial output rose 0.9% mom in May, its strongest monthly increase since January. It is conceivable that at these depressed levels markets have unwound some of their short Sterling positions. Nevertheless, Sterling volatility may remain elevated in the run-up to the vote for a new prime minister in about ten days time.
