GBP: Downside risks arise from budget event – ING

EUR/GBP eased back below 0.840 last week following a modestly hawkish BoE meeting and broader unwinding of EUR longs, ING's FX analyst Francesco Pesole notes.

Upside risks to EUR/GBP extending beyond the recent 0.845 highs

"EUR/GBP eased back below 0.840 last week on a modestly hawkish Bank of England meeting and broader unwinding of EUR longs. We are bullish on the pair this week." 

"Spending cuts should be enough to meet the fiscal rule. However, the gilt market will be on the lookout for any missteps in the very tight room for fiscal manoeuvring, and the bar for a negative reaction either in bonds or a meaningful repricing lower in growth expectations both have the potential of hitting sterling. We see upside risks to EUR/GBP extending beyond the recent 0.845 highs this week."

"We also have inflation data in the UK this week, but we don’t expect it to be a major market-moving event, with services CPI expected to have remained close to 5% in February."