Budget Uncertainty Leaves Sterling Vulnerable Against Euro, Rabobank Says

Rabobank Senior FX Strategist Jane Foley pointed to growing fiscal risks for the UK as the Burnham government signals flexibility in fiscal rules and plans to ramp up infrastructure spending. Such moves could increase gilt issuance and add to the tax burden, unsettling currency markets.

Foley noted that this policy backdrop leaves sterling vulnerable, particularly against the euro. The combination of more sovereign debt supply and a less rigid fiscal framework may weaken investor confidence.

The bank maintains a cautious view on EUR/GBP, seeing potential for the pair to edge higher if the budget details fail to reassure markets about the UK’s debt trajectory.