Pound Faces Fiscal and BoE Risks, Rabobank Strategist Warns

Rabobank's Senior FX Strategist Jane Foley warns that the British Pound (GBP) is vulnerable to policy risks due to high foreign ownership of gilts and market pricing for Bank of England rate hikes. The Pound has been range-bound against the Euro (EUR), with EUR/GBP staying within a defined range established last Friday.

Foley notes that the gilts market can be sensitive to negative budget-related news, particularly due to high foreign ownership. This sensitivity could have a detrimental impact on the Pound if overseas buyers react negatively to souring news flow.

Additionally, Foley expects a hawkish takeaway from next week's Bank of England meeting to already be priced in, which could lead to a Pound decline if the BoE appears dovish.