Euro Set to Outperform Pound as UK Fiscal Concerns Mount

Rabobank analysts expect the Euro to Pound (EUR/GBP) exchange rate to rise towards 0.87 over the next three months, despite a muted reaction to Chancellor Healey's first major address.

The current EUR/GBP rate is around 0.8589, which is roughly 1.3% below Rabobank's forecast of 0.87. While Pound Sterling gained some support from Healey's speech, the absence of detail on how new investment would be funded prevented a stronger response.

Rabobank considers market pricing for two 25-basis-point Bank of England rate increases over the next six months to be too aggressive. 'It is RaboResearch's central view that the BoE will leave rates on hold for the rest of the year,' they stated.