GBP: Fiscal policy remains the weakest link – ING
|The rug was pulled from under the sterling rally yesterday when the Financial Times reported that the Office for Budget Responsibility had indeed lowered its productivity forecasts for the UK economy. This will deprive Chancellor Rachel Reeves of expected revenues and potentially add £9bn to the fiscal gap she faces in November's budget, ING's FX analyst Chris Turner notes.
EUR/GBP may continue to trade in a 0.8650-0.8715 range
"The negative event risk of November's budget is offset by the recently turned hawkish Bank of England. Sterling has sold off this morning on a slightly sub-consensus August CPI services reading at 4.7%, even if the BoE's preferred measure of services inflation has remained unchanged at 4.2% YoY."
"We think the US Dollar (USD) will be the dominant FX theme, and GBP/USD should find support near 1.3600 before being dragged above 1.37. Sterling's fiscal vulnerability looks more like a story for EUR/GBP. Yet a still hawkish BoE may mean EUR/GBP continues to trade in a 0.8650-0.8715 range."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.