EUR/GBP likely to break back below 0.70 in early 2016

Sterling has been mediocre performer in November and till date, without any independent direction. EUR/GBP followed rate spread expectations closely, but much of variation in the spread was driven by EUR, rather than GBP.

There is a constructive veiw for GBP, moving ahead, largely led by conventional policy expectations and underpricing the first and following rate hikes.

First UK rate hike is widely expected in Q2 2016, almost an year ahead of SONIA curve. GBP should revert to outperform on its crosses, as the markets price in the policy rate prospects.

"EUR/GBP is expected to break back below 0.70 in the early part of 2016 and GBP outperforms all other G10 currencies with the exception of USD on that time horizon", says RBC Capital Markets in a research note.