GBP flows: GBP softer as UK yields edge lower on Bailey

GBP under a little pressure against the EUR this afternoon as UK yields edge lower. Comments from Bailey this morning may have been a factor. Although he still indicated that BoE easing would be gradual, he also said firms were putting off investment decisions due to uncertainty, with trade decisions a major factor. EUR/GBP is testing towards 0.86, and there is scope for further gains if yield spreads with the Eurozone continue to narrow. Ultimately, if real yields with the Eurozone were to equalize, there is scope for a move above 0.90. However, if BoE easing remains gradual – i.e. at 25bps a quarter – GBP declines are likely to be slow.