Trade Recommendation: LONG EURGBP (Half risk at CMP .8365 & half risk at .8325), TP .8490 & SL .8225 

Introduction: Due to the material month end flows in favour of DXY against Euro, EURGBP has sharply moved lower to .8365 levels currently. It has also gone below the 100 DMA of .8335 and made a low of .8316. We believe .8320 level is an excellent level to buy EURGBP as it is also the 23.6% retracement of the entire move between the 1yr high of .8613 & the 1yr low of .8230. Fundamentally, last week lower than expected CPI nos in UK as well as the Spring statement from UK Chancellor demonstrates the UK issues with fiscal tightening (as loosening elsewhere) and a growth forecast that is still too high further out should weigh on the pound at some point. In ECB rate pricing, markets are still pricing in 60 bps of cut in REMCY25 which is high as per our view that ECB might cut only once now in June by 25 bps to end with a terminal deposit rate of 2.25%. Hence, we remain bullish on Euro for this reason too. And the best way to express this view is via short GBP which looks over priced to us in current volatile times.

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