Pound Rally Built on Weak Foundations, Analysts Warn
Analysts at ING argue that the British Pound's summer rally is built on weak foundations, driven more by positioning and carry trades rather than a lasting improvement in UK fundamentals.
The analysts, including Chris Turner, Francesco Pesole, and James Smith, expect UK short-dated rates to drift lower and fiscal risks to resurface into autumn, leading them to predict a rise in EUR/GBP towards 0.88 by year-end and 0.90 in 2027.
According to their central view, the EUR/GBP exchange rate should trade higher from here, driven by positive near-term public finance trends despite longer-term concerns over borrowing increases above current budget plans.
The analysts also predict that GBP/USD will continue to trade within a 1.32-1.36 range, as they expect the Fed not to tighten in this cycle and the dollar to soften.