June 24, 2024

EUR/GBP: Sterling may struggle to reach 0.84 year-end forecast

EUR/GBP: Sterling may struggle to reach 0.84 year-end forecast

EUR/GBP rose above 0.86 this morning for the first time since mid/late July. Jane Foley, FX strategist at Rabobank, believes it will not be easy for the pound to meet its year-end forecast of 0.84.

Sterling receives little support from Bank of England member Saunders

“Johnson’s strong parliamentary majority suggests that he, and with it sterling, has a significant buffer against political uncertainty. However, given the additional cost of raising taxes, many businesses and consumers are likely to feel much less secure.”

“The Bank of England – Hawke Saunders indicated this morning that the UK economy is likely to be fairly close to pre-pandemic levels. However, it also noted that the recovery has been very uneven. And he warned that further rate hikes would be warranted. In the next year or so, but he thinks the bank won’t raise rates significantly, and since Saunders no longer appears hawkish as he did in his late July speech, his comments didn’t provide much support for sterling.”

“While we do not expect sustained support for the Euro from this week’s ECB meeting, our long-term end-of-year target of 0.84 in EUR/GBP could be too high for the Pound.

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