Rabobank Eye Move Back Below 0.87

Rabobank note that “despite this year’s better than expected UK borrowing data, the long-term constraints of the UK debt pile suggests that Hunt is likely to retain budgetary prudence next week (in the Budget).”

• “That said, there is widespread speculation that tax cuts could be announced in the spring ahead of next year’s election.”
• “The absence of a fiscal boost this autumn is likely to promote the view that BoE policy will remain on a protracted pause.”
• “Since UK CPI inflation is well above the levels in the US and in the Eurozone, the market will continue to speculate that any rate cut from the BoE next year will follow behind both the ECB and the Fed.”
• “While last week’s UK Q3 GDP data at flat q/q confirmed that the economy remains mired in stagnation, in our view the Eurozone may already be in technical recession.”
• “In our view, Germany’s poor economic outlook suggests scope for EUR/GBP to tick back below the 0.87 level in the weeks ahead.”