British Pound: Seen weakening against Euro on hawkish BoE pricing – ING
ING strategist Francesco Pesole reports that Sterling gained modestly, helped by Chancellor John Healey’s first major speech stressing fiscal discipline and keeping long-end gilt moves aligned with global bond selling.
ING strategist Francesco Pesole has noted that the British pound is showing signs of weakening against the euro, largely due to expectations of a hawkish stance from the Bank of England. This sentiment stems from the belief that the Bank of England is being overly cautious in its monetary policy. Chancellor John Healey's recent speech focused on fiscal discipline, which provided a brief boost to the sterling.
The speech was seen as reassuring to markets, particularly as the UK prepares for the imminent budget announcements in October. Currently, the sterling is priced without a fiscal risk premium, suggesting that the market may become more sensitive to concerns. Nevertheless, the government appears to be mindful of its relationship with the bond market, and it is unlikely to engage in a significant conflict, given the rapid impact that rising yields can have on fiscal flexibility.
The outlook for EUR/GBP remains positive based on the analysis that the Bank of England's expectations are too aggressive. The article was assisted by AI but reviewed by an editor, bringing together insights from commercial analysts and additional perspectives from both internal and external professionals.
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