British Pound: Budget risks threaten gains against US Dollar - Nordea

Nordea strategists note EUR/GBP has traded between 0.84 and 0.87 since late February, with recent British Pound (GBP) gains helped by external factors. They highlights diminished carry appeal as the Bank of England (BoE) holds rates at 3.75%, resilient UK growth, and a crucial Autumn Budget Bill. A November hike may support GBP, but fiscal missteps could push yields higher and weaken the Pound.

Autumn Budget seen as key risk

"EUR/GBP has traded in the range 0.84-0.87 since late February when the conflict in the Middle East escalated."

"The GBP has gradually lost its carry attractiveness with the Bank of England maintaining its policy rate at 3.75% this year."

"Economic performancehas been resilient amidst the geopolitical turbulence with GDP growth averaging +0.6% quarter-on-quarter this year."

"The Autumn Budget Bill, due to be presented on October 28th, will be the biggest challenge to date for Premier Minister Burnham and Finance Minister Healey."

"There is a looming risk that markets could be dissatisfied with the fiscal measures aimed at reducing the budget deficit, which could push yields higher and weaken the pound."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)