The euro looks undervalued against sterling and has limited scope to extend its recent fall, ING says. “EUR/GBP has moved back below 0.8600 after a very small rebound and we estimate the pair to be trading at around a 2.0% short-term undervaluation at the current levels, which falls beyond the 1.4% 1.5 standard-deviation lower-bound,” ING analyst Francesco Pesole says in a note. 

EUR/GBP will increasingly struggle to fall given its undervaluation and as markets are already pricing in 100 basis points of interest-rate rises by the Bank of England, he says. EUR/GBP trades flat at 0.8585 after earlier hitting a one-week low of 0.8576, according to FactSet.