According to ING’s Francesco Pesole, the British Pound has demonstrated resilience against the US Dollar, with EUR/GBP declining by approximately 0.5% since Friday. This movement is attributed in part to precautionary positioning ahead of the upcoming Bank of England (BoE) meeting scheduled for Thursday [1]. Despite this recent strength, Pesole highlights that the risks for the BoE are skewed towards a dovish outcome this week. He notes that, unlike the European Central Bank (ECB), BoE policymakers are likely to maintain a dovish stance, emphasizing that there is no evidence of price pressures extending beyond energy prices [1].
Pesole also points out the possibility that BoE Governor Andrew Bailey may push back against aggressive market expectations, which currently price in 45 basis points of tightening by December and 100 basis points by June [1]. Given these factors, ING expresses skepticism that EUR/GBP can fall much further from current levels. Instead, the analysis identifies several upside risks for EUR/GBP in the coming weeks, including potential shifts in monetary policy, fiscal developments ahead of the late October budget, and increasing political pressure on Downing Street regarding independence referendums in Scotland, Wales, and Northern Ireland [1].
ING maintains a target of 0.87 for EUR/GBP, suggesting limited further downside for the currency pair and highlighting the potential for upward movement should the outlined risks materialize [1].
CONCLUSION
ING’s analysis suggests that the British Pound’s recent resilience may be tested by dovish risks at the upcoming Bank of England meeting. With multiple upside risks identified for EUR/GBP, the firm maintains a 0.87 target, indicating limited further downside for the pair in the near term.