GBP v EUR is either in overbought territory or this is the new normal for the foreseeable i'm afraid..
|
| £-€ has lost 1.1% so far this week with no actual event occurring to cause the mini-crash.
As I explained yesterday in the report (buy the rumour, sell the news via the FT report) and touched on last week (US traders consistently devaluing GBP), the Pound is very clearly completely shackled to next month's UK Budget.
At this stage, there isn't much Chancellor Reeves can do that will make Sterling perform even worse (bad joke).
Even though UK bond yields are dropping slightly day-by-day (for now and as they are globally at the moment), Goldman Sachs has changed their opinion on next month's BoE meeting and they now suggest a 25bp cut will happen.
Government borrowing costs are heading lower, but a large investment bank has suddenly changed its UK interest rate forecast for next month? Maybe the damage was already done in the borrowing increase that has already been realised this year.
If Reeves is going to tax more than anticipated, economic growth will slow further and the central bank must act decisively on interest rates (faster than currently expected).
A lower UK interest rate is good for consumers, but bad for the Pound (in particular £-€ because of the EU & UK interest rate divergence currently).
How bad can £-€ get?
Mid-market saw a couple of weeks down in the 1.11's early 2023 and a few days in the 1.10's late 2022 gives you an idea..
Always remember, financial markets are forward thinking, they don't operate in what is happening now, it's all about the future. The 'if's' and the 'buts' are the real market drivers. |
|