British Chancellor Reeves is walking a fine line, trying to strike a balance between finding funds to invest for economic growth while maintaining an atmosphere of fiscal prudence, notes Jane Foley, currency analyst at Rabobank.

GBP is doing well so far

“To avoid too much shock to immense investors with the October 30 budget announcement, Reeves has already revealed various parts of her program. GBP has performed well so far, partly because the BoE is less dovish than some other G10 central banks.

“Meanwhile, a more dovish ECB weakens the euro’s resilience. Ÿ Despite the risks to GBP arising from changes in fiscal policy settings, our main view remains that the EUR/GBP rate will continue to decline to the 0.8150 area over the next 12 months.

“We will revise our USD forecasts in early November and see a downside risk to our forecast.”