EUR/GBP: Credit Agricole is bearish with 0.70 in sight

"The GBP has not increased recently, mainly due to lower market expectations in relation to the BoE. The BoE's chief economist recently reported being less confident that the BoE could increase interest rates because of falling inflation growth and the strength of the Sterling.

But one must note that domestic conditions prevented medium-term inflation expectations from receding. From this point of view it should be noted that 5-year inflation expectations remain well above 3%. This contrasts with the Euro zone where weak growth increases the risk of falling inflation.

We therefore believe that there is room for monetary divergence to weigh down on the EUR/GBP. We remain bearish on this pair since our entry at 0.7313 with a stop loss at 0.75 and a target of 0.70." says Credit Agricole.