British Pound: Sterling draws support against Euro from high-carry profile – ING

ING expects 25bp Bank of England rate rises in February and November, as growing market confidence in the tightening cycle eases earlier doubts over the durability of sterling’s gains. According to ING’s Chris Turner, EUR/GBP reflects both strength in sterling itself and weakness in the euro. He expects the pair to remain in a 0.8360–0.8430 range, with next week’s UK budget unlikely to disrupt its break below 0.8400.

BoE tightening expectations underpin sterling

"It seems like sterling is riding on the coat-tails of PM Andy Burnham's popularity. In reality, it looks like there is both independent sterling strength and independent euro weakness at play in EUR/GBP."

"Earlier this summer, we had felt that sterling gains would not last. But now greater market confidence in a Bank of England tightening cycle – we look for 25bp hikes in February and November – makes sterling a high-carry European currency."

"Next week's UK budget looks unlikely to derail the recent EUR/GBP break below 0.8400. And with the euro still having plenty of room to drop on French politics, EUR/GBP can stay offered in a 0.8360-0,8430 range for the time being."

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