According to Francesco Pesole at ING, the British Pound is benefiting from a supportive environment as the Bank of England (BoE) signals its readiness to raise interest rates. ING has revised its EUR/GBP forecast, now expecting the currency pair to trade in a 0.84–0.85 range for several months, citing persistent Euro-specific risks and the BoE's hawkish stance as key factors [1].
ING notes that while market expectations for BoE rate hikes in 2027 are considered too aggressive (with 100 basis points priced in by July 2027), the likelihood of one or two rate hikes in the nearer term has increased. The firm anticipates that any dovish shift from the BoE may not occur until well into 2027, which is expected to support GBP strength in the interim [1].
The upcoming UK budget, scheduled for 28 October, is identified as a potential risk for sterling. However, ING observes that markets are currently pricing in minimal fiscal concern, and both Chancellor John Healey and Prime Minister Andy Burnham have demonstrated awareness of market sensitivities. As a result, ING does not expect the budget to trigger significant bond market volatility or have a lasting negative impact on the GBP [1].
CONCLUSION
ING sees the British Pound on firmer ground due to the BoE's hawkish signals and ongoing Euro-specific risks. While the UK budget presents a potential risk, market expectations remain stable, and no significant volatility is anticipated. The outlook for GBP remains positive in the near term, with strength likely to persist barring unexpected fiscal developments.