POUND STERLING TO RECLAIM A LITTLE GROUND VS. THE EURO THIS YEAR – RABOBANK
EUR/GBP offered below 0.8600. Economists at Rabobank analyze Pound Sterling’s outlook.
High debt levels will limit the scope for spending
Relatively slow growth and high debt in the UK are not a good combination for a new government. The lessons learnt from the Truss debacle have highlighted that the markets have no tolerance for unfunded spending commitments and stressed the importance of budgetary prudence. This should narrow scope for spending giveaways after the election and potentially reduce the likelihood that GBP is undermined by political upheaval.
We continue to expect the GBP to reclaim a little ground vs. the EUR this year and retain our forecast of EUR/GBP 0.8400 by year-end.
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