Foley Sees Volatility Ahead in EUR/GBP Amid UK Budget Uncertainty

Rabobank's Senior FX Strategist Jane Foley is cautioning investors about the potential impact of the UK government's budget uncertainty on the British Pound. According to Foley, the planned flexibility in fiscal rules and increased infrastructure spending could lead to more gilt supply and tax speculation.

This, in turn, may keep the market nervous until autumn, with Foley recommending buying EUR/GBP on dips towards 0.85. The current resistance area is around 0.8578, marked by the 50-day simple moving average (SMA).

Foley acknowledges that borrowing to invest might be more forgivable for the market, but extra gilt supply will still need to be absorbed. She also notes that infrastructure projects take time to raise capacity and may not have a significant impact on growth immediately.