Rabobank’s Senior FX Strategist Jane Foley discusses the British Pound’s (GBP) recent performance, noting it is currently the top G10 currency on a 1‑day view but only middling over longer horizons. Foley expects EUR/GBP to trade in a range over the coming weeks, with a mild upside bias later in the year as fiscal realism and reduced BoE rate hike risk weigh on Sterling.

Sterling resilience and fiscal constraints

“The pound is sitting pretty this morning as the top performing G10 currency on a 1-day view, though its performance in most other time frames can be better described as ‘middling’.”

“There have been some better-than-expected UK economic data released in recent weeks. This means that the UK economy, along with that of the Eurozone, can be described as ‘resilient’ through Q2 and into the summer.”

“We expect further range trading in EUR/GBP over the coming weeks, with a mild upside bias later in the year as fiscal realism weighs and BoE rate hike risk is further priced out.”

“In view of the energy price crisis stemming from the Iran war, this is a better outcome than most forecasters had expected.”

“It remains Rabobank’s central view that the MPC will continue to side-step a rate hike this year.”

“Since the market still sees some risk of higher rates this year, steady policy, in line with our view, could undermine the pound.”

“We maintain a 3-month EUR/GBP forecast of 0.87.”