ING: The GBP - FJElite

EUR/GBP has gradually eased back to the pre-UST buybacks 0.8550-60 area - a signal the positive premium on the euro has been scaled back. If calm is indeed restored in the bond market, expect the pair to return to tracking short-term rate differentials closely.

That could mean a low volatility environment though, as the UK calendar is rather empty for the next couple of weeks. Anyway, we retain a preference for higher EUR/GBP as market pricing for 32bp of Bank of England tightening by year-end remains too hawkish. We still expect no hikes and a move to 0.870 in the coming months on the back of dovish repricing in the GBP front end.