There are two main reasons for buying a currency; yield and security. The GBP traditionally had a yield advantage over the DMK and then the EUR but this changed after the GFC and the GBP fell very heavily. My argument for some time now has been that security is now a much more important issue when choosing a currency, as we can see with the massive flights into the CHF. With all the EUR woes and uncertainties, I feel that EUR/GBP will retrace a large portion of the 30 big figure move from .68 to .98.
I’m talking my book here in that I’m long cable (and a bit of GBP/JPY but that’s another story). I feel that EUR/USD will chop around 1.40 for the next few weeks but that EUR/GBP could generate some substantial bearish momentum. If it starts falling, there will be little or no retrace. As with any big cross move, the components move in sequence; EUR/USD fell from 1.49, now cable may rally back towards 1.70, then the next EUR/USD downleg will commence.