British Pound: Why Does Sterling’s High-Carry Profile Support It Against the Euro? – ING

Sterling is drawing support from growing market confidence in the Bank of England’s tightening path, easing earlier concerns that the Pound’s gains would fade. ING expects 25bp hikes in February and November. According to ING’s Chris Turner, EUR/GBP reflects a combination of independent GBP strength and Euro weakness. He expects the pair to remain in a 0.8360–0.8430 range, with next week’s UK budget unlikely to disrupt its break below 0.8400.

Can BoE tightening sustain sterling’s strength?

"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. Know more.)