OCBC forecasts EUR/GBP to rebound toward 0.87 as UK fiscal concerns and BoE policy divergence weigh on GBP strength.
The British Pound’s recent rally against the Euro is expected to fade as renewed UK fiscal concerns under Prime Minister Andy Burnham create headwinds. OCBC analysts highlight risks from Burnham’s pledge to use fiscal flexibility, unsettling gilt markets despite a market-friendly Chancellor appointment.
EUR/GBP has fallen to one-year lows, but OCBC sees the correction nearing its end. The Bank of England is viewed as less likely to tighten policy compared to European peers, while higher energy prices may prompt additional rate hikes in Europe.
OCBC targets a recovery in EUR/GBP toward 0.87 in the coming months, citing challenges in balancing defense spending and departmental budget reversals within current fiscal rules. The Autumn Budget and next year’s Spending Review are key upcoming risks.