EUR/GBP: Range set to persist – Rabobank

RaboResearch Global Economics & Markets’ FX Strategy team assesses EUR/GBP in light of UK politics, growth and monetary policy. They note the Pound’s recent support from stronger UK GDP, but expect GBP bulls to stay cautious ahead of the October 28 budget. With Eurozone growth headwinds and political risks in France and Germany, they see limited EUR upside and expect EUR/GBP to remain rangebound in coming weeks.

Pound cautious as budget looms

"The pound is the best performing G10 currency on a one-day view, finding support this morning on the back of better-than-expected UK GDP data. That said, given the approach of the October 28 budget, we expect GBP bulls to remain cautious in the weeks ahead."

"That said, while higher short-term interest rates are a currency positive factor, we see little room for sustainable gains for the pound from this front given that more than 100 bps of policy tightening is priced in on a 12-month view. In our view, it is more likely that GBP could soften as rate hike risks are reined in."

"That said, headwinds to growth in the Eurozone plus political uncertainties in both France and Germany could limit the EUR’s potential and reduce upside potential for EUR/GBP into the new year. We expect EUR/GBP to hold its recent range in the weeks ahead. We will be re-evaluating our medium-term EUR forecasts in the coming days."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)