EUR/GBP could again return to the 0.84 area – ING

The British pound briefly rallied on the rise in money market rates but ended the day net weaker. Economists at ING believe that the EUR/GBP pair could move back lower to 0.84.

No real signs of fiscal risk in sterling

“We were wondering whether fears over the spending plans of prospective Tory PM – Liz Truss – were driving Gilts and effectively putting a fiscal risk premium into sterling. But the UK's five-year sovereign credit default swap continues to trade at a very narrow 17 bps – suggesting these fiscal concerns may be overplayed.”

“We are more in the camp that BoE rate hikes can see sterling confound some of the more dire predictions about its path ahead. And EUR/GBP could again return to the 0.8400 area.”