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Pound outlook faces limits from UK fiscal pressures, OCBC says

OCBC expects the EUR/GBP rebound to resume, targeting a move back toward 0.87 as upside for the pound remains constrained by high debt and spending demands.

Reported · Written up by our desk · Major Pairs

OCBC strategists Sim Moh Siong and Christopher Wong said optimism around a fiscally conservative agenda in the United Kingdom has recently supported the British pound and gilts, including after reports that incoming UK Prime Minister Burnham may appoint Shabana Mahmood as chancellor.

They cautioned that GBP upside is still limited by high public debt, rising interest costs, and spending pressures, including defence outlays and reversing cuts to unprotected departments, which could strain fiscal room ahead of the Autumn Budget and next year’s Spending Review.

The strategists said an OECD warning that fiscal discipline remains essential underscores those constraints, pointing to pressure from healthcare and social care spending alongside debt and elevated borrowing costs.

Against this backdrop, OCBC expects the recent EUR/GBP correction to fade and the cross to recover toward 0.87, consistent with a range-bound outlook for the pound.

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