Rabobank Lowers EURGBP Forecast Citing Eurozone Fiscal Risks

Rabobank's Senior FX Strategist Jane Foley has revised her outlook on the EUR/GBP currency pair, citing divergent fiscal and political risks in Europe and the United Kingdom. Foley notes that France's current fiscal and political challenges are more pronounced than those in the UK, where budget concerns are already factored into the British Pound's (GBP) value. This dynamic has allowed the EUR/GBP pair to decline ahead of the UK's October 28 budget announcement.

Rabobank has lowered its EUR/GBP forecasts, now predicting the pair will trade around 0.85 over a 3-month horizon. Foley suggests that increased volatility is likely this month, but the UK's budget challenges are less likely to trigger a significant GBP sell-off compared to the Euro's vulnerabilities. She anticipates that the Euro will remain under pressure, despite potential pullbacks that could offer temporary relief from current selling pressures.

The revised forecast reflects a cautious stance on the Euro's strength, with Rabobank emphasizing that Europe's current circumstances differ from past crises, though France's issues present notable risks. Overall, the strategist expects the Euro to stay on the back foot, with any gains likely to be capped by the prevailing fiscal risks.