Rabobank analysts note that they have revised down the 12-month EUR/GBP forecast to 0.87 from 0.90 and explain:

Long EUR positions have started to be pared back

The market has grown less confident about the likelihood of another policy change after the last ECB rate hike in late July. Although it will probably be close, we believe that the Governing Council will maintain its current course at its meeting in September, and recent soft economic statistics have confirmed this belief. German IFO business climate survey showed that confidence continued to decline in August, while French and German PMI surveys were surprisingly weak.

“CFTC speculators’ data highlight that net long EUR positions have started to be pared back.  However, net longs remain high from a historical perspective. If the ECB keeps policy on hold next week, the EUR is likely to be vulnerable. This could trigger a move in EUR/GBP towards the bottom of its recent range at 0.85.  Considering the weakness of Germany growth we have revised down our 12-month EUR/GBP forecast to 0.87 from 0.90.

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