British Pound: Firmer ground with BoE hike risk – ING

Francesco Pesole at ING highlights a supportive backdrop for the Pound, with EUR/GBP now expected to trade in a 0.84–0.85 range for several months as Euro-specific risks persist and the Bank of England signals readiness to hike. While ING sees BoE expectations as too hawkish for 2027, one or two hikes look increasingly likely, and the budget risk is seen as manageable for Sterling.

Range-bound EUR/GBP and supportive BoE

"We have lowered our EUR/GBP forecast and now expect the pair to trade in a 0.84-0.85 range for at least several more months. Idiosyncratic risks surrounding the euro are unlikely to fade anytime soon, and the Bank of England has sent a clear enough signal that it is prepared to hike."

"We still think BoE rate expectations are too hawkish for 2027 (100bp by July), but one or two hikes are looking increasingly likely. The dovish shift may have to wait until well into 2027, underpinning GBP strength."

"The UK budget on 28 October represents a potential risk for sterling, as markets are pricing in little fiscal concern."

"Even so, Chancellor John Healey and Prime Minister Andy Burnham have appeared mindful of market sensitivities."

"While the budget will be closely scrutinised, we do not currently expect it to trigger significant bond volatility or leave a lasting negative mark on GBP."

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