EUR/GBP: dips of the pair may represent buying opportunities (Morgan Stanley)

Morgan Stanley is looking to buy the EUR/GBP on dips.

"We are buyers on the majority of pairs in EUR, aided by capital flows and the reduction of political risk in the euro area. We are looking to buy the EUR/GBP in the middle of the recent tunnel, anticipating a short-term decline of the EUR/USD (on profit taking).

The rapid GBP rally driven by political stability has slowed down. The market positioning is less selling on the GBP than previously, so it can only be used as a reason for a GBP rebound if the stops are triggered.

Political uncertainty is potentially increasing ahead of the UK's 8 June legislative elections. The polls show a tight race between the two major parties (Conservatives and Labour), with a gap of 5-6 points. At the same time, consumption data is not as robust as before. On the positive side, investment spending is not as low as was expected in Q1."