Rabobank’s Senior FX Strategist Jane Foley has attributed the British Pound’s underperformance in the G10 currency group during May to heightened political uncertainty in the UK, particularly following the local elections earlier in the month [1]. Foley notes that ongoing questions regarding Labour leadership have further contributed to the Pound’s weakness, and she expects GBP to continue carrying a political risk premium for the foreseeable future [1].
Foley projects that EUR/GBP will drift higher towards the 0.89 level over the next 9 to 12 months, reflecting a medium-term bias for further Pound weakness against the Euro [1]. She also anticipates that any potential 'honeymoon period' following a Labour leadership challenge would be short-lived, as concerns over debt issuance would quickly resurface [1].
Regarding GBP/USD, Foley sees scope for further dips back to the 1.33 level on a one-month view, with UK political concerns likely to keep this level in focus throughout the second half of the year [1]. The analysis suggests that safe-haven demand for the US Dollar will persist, adding additional downward pressure on the Pound [1].
No specific market reactions or analyst opinions beyond Rabobank’s outlook are mentioned in the article [1].
CONCLUSION
Rabobank’s analysis highlights that UK political uncertainty is expected to continue weighing on the British Pound, with further downside risk against both the Euro and the US Dollar. Investors should remain cautious as political risk premiums and safe-haven flows may persist in the coming months.