Pound Vulnerable Against Euro Amid UK Budget Uncertainty

The British pound is under pressure against the euro due to ongoing uncertainty surrounding the UK's fiscal policy and upcoming budget. According to strategists at Rabobank, the pound remains vulnerable in the near term as markets digest the implications of the budget.

Rabobank notes that the market has priced in a higher risk premium on UK assets, partly due to concerns about the government's fiscal trajectory. The budget is seen as a key test for Chancellor Rachel Reeves, who must balance spending commitments with market expectations for debt reduction.

The latest positioning data shows that speculative traders have increased their short positions on the pound, reflecting a cautious outlook. Meanwhile, the euro has found support from a relatively more stable economic outlook in the eurozone, despite its own challenges.