British Pound: Could the Budget lift Sterling against the Euro? - ING

Sterling could find support if gilt–Bund spreads narrow after the budget, according to ING's Chris Turner, who sees room for a partial reversal of the 20bp risk premium in 10-year UK gilt yields. Unless minimum wage adjustments deliver a surprise, the Bank of England's tightening outlook is likely to be largely unaffected. With EUR/GBP still under pressure above 0.8350, the pair could move lower towards 0.8315.

How could the budget and gilts shape Pound crosses?

"ING's Rates Strategist, Michiel Tukker, estimates that there is a 20bp risk premium in 10-year UK gilt yields – some of which could come out of the market during today's UK budget release."

"The budget itself is not expected to have too much say on the Bank of England's tightening prospects, although any upside surprises on minimum wage adjustments could hawkishly ripple through money markets."

"Some narrowing in the gilt-bund spread today could be a reminder that the UK looks to be one of the few G7 economies heading in the right fiscal direction into 2027, with forecasts for the budget deficit heading inside 4% of GDP as higher inflation drags more income tax payers into higher tax brackets."

"EUR/GBP is holding above 0.8350 support and is looking heavy."

"Barring any surprise budget giveaways that hit gilts, it looks as though EUR/GBP can stay heavy and potentially nudge down to the 0.8315 area."

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