The EURGBP looks to now have a central bank divergence in place. The ECB met last week and Christine Lagarde revealed that the Governing Council had been unanimously concerned about inflation. This was a departure from the recent rhetoric that inflation was merely transitory. The Bank of England hiked rates last week, but that was expected. The Governor stressed that the bank of England did not want to get carried away, but instead take cautious steps. This means, on balance, that the EURGBP should find gains against the GBP. This is why the seasonal pattern in the EURGBP is so interesting.
Over the last 20 years, EURGBP has risen 20 times with an annualised return of 15.70%. The largest gain has been over 11% and the largest loss was -2.53%
Major Trade Risks: The main risk for this outlook is any deviation in monetary policy by either the ECB or the BoE.