The focus in the UK today is on the potential announcement from Chancellor Rishi Sunak of new fiscal support measures. Economists at ING expect this event to have a positive impact on the pound, dragging the EUR/GBP pair down to the 0.8450 area.

Fiscal stimulus could help the pound

“The potential announcement of a GBP10bn fiscal stimulus to address the cost of living crisis could be a means-targeted measure coming through energy bills. What could this mean for sterling? The positive could be that it allows the Bank of England (BoE) more freedom to hike. The negative could come through the equity channel where the windfall tax on oil, gas and electricity suppliers could deliver UK equity underperformance.”

“We prefer the positive factor dominating and EUR/GBP trading back towards the lower end of a new 0.8450-0.8600 trading range.”