EUR/GBP has crept above the 0.86 level this morning for the first time since mid to late July. Jane Foley, Senior FX Strategist at Rabobank, believes the pound may struggle to reach the year-end forecast of EUR/GBP 0.84.
Sterling finds little support from BoE's Saunders
“Johnson’s strong parliamentary majority suggests that he, and therefore GBP, has a large buffer of protection against political uncertainty. That said, in terms of the extra cost implied by a tax hike, many businesses and consumers may be feeling a lot less protected.”
“This morning, BoE hawks Saunders noted that the UK economy is probably fairly close to pre-pandemic levels. However, he also commented that the recovery has been very uneven. He warned that it might be right to think that rates may go higher in the next year or so. However, even he expects that if the Bank rate were hiked it won‘t be by much. Since Saunders did not sound quite as hawkish as in his speech in late July, his remarks didn’t provide much support for GBP.”
“While we don’t expect much lasting support for the EUR from this week’s ECB meeting, our long held year-end target of EUR/GBP 0.84 could prove to be too big an ask for the pound.”