Rabobank's Senior FX Strategist Jane Foley has revised the bank's forecasts for the EUR/GBP currency pair, citing divergent fiscal and political risks between Europe and the United Kingdom. Foley highlights that France is currently facing a more challenging fiscal and political backdrop compared to the UK, which has contributed to downward pressure on the Euro against the British Pound. The strategist notes that UK budget concerns are already priced into the GBP, while France's issues are seen as more acute at present [1].
Rabobank has lowered its 3-month forecast for EUR/GBP to 0.85, reflecting expectations that the pair will trade in a choppy range around current levels over the next one to three months. Foley states, 'This has allowed EUR/GBP to push lower ahead of the October 28 UK budget and should cap upside potential for the currency pair.' She also points out that increased volatility is likely to persist in EUR/GBP throughout the month, with the upcoming UK budget announcement by Chancellor Healey on October 28 being a key event to watch [1].
While Foley acknowledges the possibility of short-term pullbacks that could offer the Euro some reprieve from current selling pressure, the overall outlook remains cautious for the single currency. She concludes that the Euro is expected to remain on the back foot for now, with GBP seen as less vulnerable to a sell-off versus the Euro than it might otherwise be, given the relative fiscal positions of the two regions [1].
CONCLUSION
Rabobank's revised outlook points to continued pressure on the Euro against the British Pound, driven by heightened fiscal and political risks in Europe, particularly France. The bank's new 3-month forecast for EUR/GBP is 0.85, with expectations of ongoing volatility and a cautious stance on the Euro in the near term.