The upcoming budget is the next anticipated event on the UK political calendar. If the budget aligns with expectations, economists at Rabobank suggest it would provide limited motivation for the Pound Sterling (GBP).
EUR/GBP to edge lower in H2 to 0.8400
The proposed headline grabber in the form of a 2p reduction in National Insurance has been discussed. Although this has the potential to support demand, investors have likely already factored this in. With Chancellor Hunt facing constrained fiscal options, today’s budget may not have a significant impact on the Pound. The UK’s tight fiscal position also indicates that the upcoming general election may not offer much room for volatility.
Our outlook remains for EUR/GBP to gradually decline in the second half of the year, reaching 0.8400. This projection is based on the assumption that the UK economic outlook improves throughout the year, enabling the Pound to sustain its tentative recovery.
We anticipate the possibility of Cable rising to 1.3000 within the next 12 months. However, we expect short-term downward movements in the next one to three months, driven by potential episodes of USD strength.
