The highlight of today’s session is the new Labor government’s first budget, which will be published at 13:30 CET. Will sterling rise with pro-growth tax easing and a rise in real yields? Or will sterling remain stable with a carefully crafted series of tax rises and spending increases that balance everyday spending? Or will Labor go overboard with some spending plans, reflected in a higher-than-expected Gilt supply, reinserting a fiscal risk premium into the pound? asks Francesco Pesole, FX analyst at ING.
EUR/GBP is currently pressing 0.8300
“Discussing with team members, we believe a stable outcome for sterling is slightly more likely as Chancellor Rachel Reeves will proceed cautiously. Downside risk will likely be judged based on the key metrics of the UK’s supply mandate. UK Gilt for tax years 24/25 and 25/26.”
“Current figures are around £276/277 billion. The consensus seems to be that a modest increase in this supply, in the region of £10-20 billion per year, would be digestible for the Gilt market. Any “A figure above £300 billion is therefore likely to be negative for Gilts and sterling.”
“EUR/GBP is currently pushing 0.8300, largely due to a dovish ECB policy reassessment ahead. As mentioned above, we do not see a strong reason for EUR/GBP to bounce today. And below 0.8300, the next immediate target is 0.8250/80.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
