EUR/GBP Range Set to Persist Amid UK Politics and Eurozone Growth Concerns

The EUR/GBP currency pair is likely to remain rangebound in the coming weeks due to headwinds in Eurozone growth and political uncertainties in France and Germany. According to Rabobank's FX Strategy team, the Pound's recent support from stronger UK GDP data will not be enough to push GBP bulls past caution ahead of the October 28 budget.

The team notes that while higher short-term interest rates are a positive factor for the pound, there is limited room for sustainable gains given that over 100 basis points of policy tightening is already priced in on a 12-month view. They expect the pound to soften if rate hike risks are reined in.

On the other hand, headwinds to growth in the Eurozone and political uncertainties in France and Germany could limit the EUR's potential and reduce upside potential for EUR/GBP into the new year.