Rabobank Sees Euro-to-Pound Rate Rising Towards 0.87 Amid UK Fiscal Uncertainty

Rabobank analysts forecast that the Euro-to-Pound exchange rate will rise towards 0.87 over three months, citing UK budget risks and gilt sensitivity.

The current rate is around 1.3% below Rabobank's target of 0.87, with the pair trading near 0.8587 on Friday.

Rabobank attributes this risk to foreign investors owning approximately 30% of UK gilts and being more reactive to disappointing fiscal news or changes in borrowing costs.

The bank notes that France also faces a difficult budget process, but investors selling French government bonds can move into debt issued elsewhere in the Eurozone without leaving the single currency.