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Sterling seen nearing exhaustion versus euro as EUR/GBP targets 0.87

OCBC points to OECD warnings on UK fiscal constraints, citing high public debt, elevated interest costs, and rising healthcare and social care spending as limits on GBP strength.

Reported · Written up by our desk · Major Pairs

OCBC strategists Sim Moh Siong and Christopher Wong say recent British pound strength looks stretched as markets price in expectations of fiscal discipline tied to Andy Burnham’s new UK government.

They argue that the euro should regain ground, noting EUR/GBP has fallen to a one year low and they expect the pair to recover toward 0.87 in coming months, consistent with a generally range bound view on sterling.

OCBC links that stance to OECD concerns about UK fiscal flexibility, highlighting high public debt, elevated interest costs, and rising healthcare and social care expenditures as key constraints.

The strategists also say the recent EUR/GBP pullback may be nearing exhaustion even as renewed energy price gains could raise the risk of additional ECB rate hikes, while the Bank of England still appears the least likely among major central banks to deliver a rate hike.

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