GBP: Firming up – ING

The Pound Sterling (GBP) has continued to firm up against the euro, as the narrative of dire debt servicing issues in the UK lost some steam, ING's FX analyst Francesco Pesole notes.

Downside risks remain ahead of the pre-Budget period

"When looking at the infamous 30-year bonds, gilts have actually outperformed the rest of Europe since the start of the month, now yielding 25bp below the 3 September 5.74% peak."

"The pound’s much higher sensitivity than EUR and USD to back-end bond selloffs means downside risks remain ahead of a possibly chaotic pre-Budget (26 November) period. But higher front-end rates led by a hawkish Bank of England continue to make the pound an expensive sell against the euro in periods of gilt stability."

"The UK releases July’s GDP data tomorrow morning, although that is not on top of the data points likely to steer the MPC’s views now. Next week, we’ll see the key jobs and inflation numbers for August. Until then, EUR/GBP can remain gently offered."