Investing.com – ING on Friday said it expects the euro to strengthen against the in the near term, with projected to move past 0.880 as domestic pressures weigh on sterling.
The bank anticipates a rate cut at the Bank of England’s March meeting, which is currently priced in at 20 basis points. ING forecasts another rate cut in June, though markets have assigned only a 40% probability to that move.
Current geopolitical risk and fragile risk sentiment should weigh more heavily on the pound than the euro, according to ING. Domestic dynamics remain the primary factor expected to pressure sterling.
Political risk represents another major concern for the pound, the bank said. ING continues to see short-term upside potential for EUR/GBP. The euro is less preferable than the pound in ING’s current assessment, with the bank maintaining its baseline forecast for EUR/GBP to breach the 0.880 level.
Separately, on Friday, official data revealed that January retail sales surged 1.8%, representing the most substantial monthly gain since May 2024 and significantly outperforming market expectations.
Furthermore, the Office for National Statistics (ONS) reported a larger-than-anticipated budget surplus for January. This fiscal development led some market participants to speculate that the government might reduce its bond issuance in the coming months, providing a technical tailwind for gilts, even as long-term fiscal sustainability remains a point of debate among analysts.
Despite robust consumer spending data, British sovereign bond yields retreated on Friday. Investors appear to be doubling down on expectations for lower interest rates, even as new economic indicators suggest a strengthening recovery following the stagnation seen at the end of last year.
Gilt yields saw a broad decline as the settled near 3.7800%, the fell to 4.3500%, and the eased to 5.147%. British pound also fell against dollar falling to 1.3464, while rose 0.6% to 10,686.60.
