After all the gyrations in bond markets last week and predictions that the UK would need an IMF bailout, conditions have settled down, ING’s FX analyst Chris Turner notes.
EUR/GBP remains contained in a 0.86-0.87 range
“Gilt auctions seem to have been going well, showing that the UK has no problem servicing its debt if the price is right. Today sees £4bn of six-year Gilts auctioned, for reference.”
“EUR/GBP remains well contained in a 0.86-0.87 range. Sterling’s high-yield status makes it an expensive sell, and unless there is some imminent bad news expected, sterling can hold its own at these levels. Next week’s Bank of England rate meeting should, in theory, keep sterling supported unless upcoming jobs and CPI releases very much surprise on the downside.”
“We’re still happy with our calls that EUR/GBP ends the year near 0.87 and GBP/USD near 1.38 as the dollar bear trend dominates.”