We judge the line-up of UK fundamentals as being still fairly sour. Weak growth and high inflation are coupled with high national debt and concerns about investment growth. That said, the drop in the UK’s current account deficit (% GDP) should afford the Pound some protection meaning that there should be less potential volatility in GBP if recession fears rise. Even so, we expect that GBP will end the year a little softer against the EUR around EUR/GBP 0.87.

Cable will be subject to the direction of the USD, but we expect the currency pair will struggle to extend beyond recent highs and look for the GBP/USD pair to end H2 lower in the 1.22 region.