Last week’s headlines centered around Trump’s tariffs, US growth risks, Ukraine, European defense and German fiscal policy, Rabobank’s FX analyst Jane Foley reports.
EUR/GBP to hold around the 0.84 area in the weeks ahead
“China, Canada, and Japan managed to steal a little of the limelight, but amid the fast-moving news-flow, there was very little space to digest the latest UK events. For UK Chancellor Reeves, this was probably both good and bad. The attention she received at the start of the year in response to the wobble in the gilts market was no doubt unwelcome.”
“That said, last week’s news that the government is lining up welfare cuts ahead of her March 26 Spring Statement was likely very deliberately timed to ensure that the event itself would create a minimum of market reaction. Assuming that the Labour government can win the support of its own MPs for welfare reform, the market is likely to welcome some fiscal consolidation from the UK.”
“That said, the dynamics for EUR/GBP have been altered by the news from the German coalition-to-be last week. As a result we have adjusted our 12-month forecast for EUR/GBP higher across the board and now have an end-of-year forecast of 0.83 from a previous estimate of 0.8150. We expect EUR/GBP to hold around the 0.84 area in the weeks ahead”
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