EUR/GBP: Political risks and energy shock – Rabobank
Rabobank’s Senior FX Strategist Jane Foley highlights that the Pound has recently outperformed the Euro, helped by fading expectations of Bank of England rate cuts, even though neither currency is seen as a safe haven. The bank expects EUR/GBP to hover near 0.87 over 1–3 months, but sees UK political risks, higher energy prices and sticky UK inflation pushing the cross modestly higher in H2.
Rabobank sees EUR/GBP grinding higher
"It is likely that GBP’s better tone vs. the EUR in recent sessions has been derived from a loss of hope regarding the prospects of BoE rate cuts in the coming months. We maintain the view that EUR/GBP is likely to hold around the 0.87 area on a 1-to-3-month view, though we expect UK political concerns to push the currency pair modestly higher during in H2 with the May UK elections potentially triggering a leadership challenge for PM Starmer."
"Clearly the impact of elevated energy prices on inflation in the UK and elsewhere will depend on how long disruption in the Strait of Hormuz continues. Our energy strategists are of the view that it may last. Rabo’s view is that UK CPI inflation may no longer fall back to just above the 2% level as previously forecast but may edge down to 2.5% before rebounding to 2.75% in Q3."
"May brings local elections in England and parliamentary elections in Scotland and Wales. A poor showing for Labour could trigger a leadership challenge. Given the UK’s high level of debt, GBP is likely to be particularly sensitive to a strong candidate from the left wing of the party. Consequently we see risk that GBP will be on the back foot into the middle of the year and beyond, and see scope for EUR/GBP to grind higher in H2."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Morgan Stanley reviews the AI crash: It's the valuation that's being slashed, not the profits! But don't rush to bottom-fish.
Morgan Stanley stated that the AI pullback is driven by valuation contraction, while profit expectations continue to rise. It advises against indiscriminate bottom-fishing upstream sectors, recommending selective allocation to application players, with priority given to those in the US and Europe with safety cushions.
SpaceX (SPCX.US) Under the $500 Billion Growth Vision: Morgan Stanley Bets on AI Computing Power Explosion, "Big Bears" Warn of a Bubble
Morgan Stanley remains optimistic that the company's stock price could reach $300, while "Big Short" Michael Burry questions whether its high valuation can be sustained. The real disagreement between the two sides centers on whether SpaceX can leverage the synergistic advantages of rockets, satellite communications, and AI computing power to generate sustained cash flow sufficient to support a $1 trillion valuation.
AI Trading "Weather Vane": Meta's Bond Issuance Faces Multiple Twists and Turns
Meta's $46 billion Election Day bond issuance faced multiple challenges: a credit rating downgrade by S&P, Microsoft gaining market share, and political upheaval. The CFO personally presented to 500 investors, ultimately paying a real financial cost—the spread on the longest-term bonds widened by 90 basis points compared to April. The Democratic "blue wave" has sharply increased regulatory risks for AI data centers, tech bond spreads continued to widen last week, and whether AI capital expenditures can translate into returns remains the biggest question for the market.
CICC: Accelerated Employment Expansion, Fed Maintains Gradual Rate Hikes
China International Capital Corporation (CICC) released a research report stating that the baseline scenario remains that the Federal Reserve will raise interest rates once more in December and then shift to a wait-and-see approach.
Crypto prices
More
