Pound Seen Weakening Against Euro Amid Hawkish BoE Expectations

The British Pound has gained modestly against its peers, thanks in part to Chancellor John Healey's recent speech on fiscal discipline. According to ING strategist Francesco Pesole, this message helped keep long-end gilt yields aligned with global bond selling trends.

However, the Pound is seen weakening against the Euro due to perceived overly hawkish expectations from the Bank of England. This assessment is a key factor in ING's positive bias on EUR/GBP.

Pesole notes that the UK government appears sensitive to market reactions ahead of the October budget headlines, which could potentially impact fiscal policy. As such, any significant deviation from current fiscal discipline may be avoided to prevent bond market confrontation.