The EUR/GBP rate remains near its recent high at 0.8450/60, notes ING currency analyst Chris Turner.
Above 0.8450/60 EUR/GBP could see 0.8500
“While we (and the UK sovereign credit default swap market) do not believe this is a Liz Truss-style moment for UK sovereign risk, we do believe that the solution to the current challenges is a negative sterling price. To prevent the risk of a breach of fiscal policy, as a rule, either the government must cut spending, or the Bank of England will cut interest rates (lowering the Gilt yield) – or both.”
“There isn’t much on the UK calendar this week, apart from tomorrow’s November jobs data. “We also wonder whether Wednesday’s release of December budget data will attract more attention than usual.”
“But overall we see no reason for sterling to rebound. Above 0.8450/60, the EUR/GBP rate may reach 0.8500. GBP/JPY is also in the spotlight with the prospect of a 25 basis point hike by the Bank of Japan this Friday. 185 looks very possible here.”
