EUR/GBP: BNP bank still thinks pair will drop to 0.6750

"Last week, the "Super Thursday" was interpreted as being "dovish" by the markets and the GBP depreciated in stride, notes the BNP bank.

"We believe that the markets gave too much importance to the 8-1 vote in favour of status quo regarding the key rates while underestimating the hawkish tone of the inflation report and especially the hawkish remarks made by Governor Carney." says the BNP bank.

"Two key factors are worth noting. Inflation will be weaker than expected in the short term, but is forecasted to rise above 2% thereafter. We have a 73% chance to see the BoE raise its key interest rates in February. Our economists forecast 6 increases in the key rates in 2016-17 while the markets have only integrated 4 increases in pricing."

"We believe the recent pullback of the GBP is a buying opportunity, especially on the EUR/GBP. The cross is expected to decline down to 0.6750." adds the BNP bank.