British Pound: High Carry Underpins Sterling Versus Euro – ING

ING expects 25bp hikes in February and November. Its analyst Chris Turner attributes sterling’s strength to both gains in GBP itself and euro weakness in EUR/GBP. Greater market confidence in the Bank of England’s tightening path has eased earlier concerns that the Pound’s advance would fade. In Turner’s view, next week’s UK budget is unlikely to reverse EUR/GBP’s break below 0.8400, leaving the pair in a 0.8360–0.8430 range.

25bp hike expectations support 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. Learn more.)