The UK is clearly not the only country facing a difficult fiscal prognosis but, since it also runs a sizeable current account deficit, there is potential for the exchange rate to be particularly sensitive to bad fundamental news, Rabobank’s FX analyst Jane Foley reports.
Rabobank sees EUR/GBP grinding higher
“This week the Pound Sterling (GBP) has again demonstrated its reaction function to a jittery gilts market. Yesterday, cable plunged around 1.5% into its lows as the USD picked up a safe haven bid. Headed into what is expected to be a tough Autumn Budget for UK Chancellor Reeves on November 26, we expect GBP to remain on the back foot.”
“We continue to expect EUR/GBP to grind higher in the months ahead and see scope for cable to dip to GBP/USD1.33 on a 1 to 3-month view.”
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