Sterling Faces Bigger Test vs Euro in October, Rabobank Predicts

Rabobank predicts the Euro-Pound rate at 0.87 in three months as fading BoE hike bets and the October Budget threaten Sterling's recent resilience.

The Euro to Pound (EUR/GBP) exchange rate has edged up towards 0.8567, with the Euro gaining around 0.2% over the past 48 hours as Sterling's recent outperformance begins to lose a little momentum.

Rabobank maintains that the UK economy has held up better than expected, but the combination of an uncertain Bank of England outlook and a difficult autumn Budget should gradually tilt EUR/GBP higher.

The bank expects further range trading in EUR/GBP over the coming weeks, with a mild upside bias later in the year as fiscal realism weighs and BoE rate hike risk is further priced out.