Missed the webinar? Here are Investing.com’s top 10 stock picks for 2026
The pound has welcomed yesterday’s UK Budget announcement, as improved fiscal headroom is seemingly not coming at a hefty price for growth. Still, a Bank of England cut in December is still on the table. Expect thinner liquidity into the weekend, with the US dollar potentially stabilising after this week’s correction
USD: Stability After Correction
As discussed yesterday, we believe this week’s dollar correction has more to do with a convergence towards lower rates following the dovish Fed’s repricing, rather than any geopolitically driven rotation away from safe havens. The outperformance of the yen relative to a high-beta European currency like SEK is a clear testament to that.
US markets are closed for Thanksgiving and liquidity conditions should be considerably thinner. That could be an attractive environment for Japanese authorities to intervene in USD/JPY. However, there may still be a preference to intervene after a USD-negative data event, and the stall in the pair may have removed some sense of urgency.
The dollar remains somewhat expensive against G10 currencies, but given the size of this week’s correction and limited room for further dovish repricing before some more data comes in, we are switching to a neutral bias on USD for this Thanksgiving holiday.
EUR: Upside Potential Remains
The euro retains some upward potential if a peace deal in Ukraine is agreed. The latest indications are that while some progress is being made, negotiations may drag on into next week.
For now, EUR/USD bulls like us should be content with the return to 1.16. We think 1.17 can be reached with the pair’s short-term undervaluation being trimmed, and our 1.18 year-end target with seasonal factors and some soft US data in December.
Today, the ECB publishes the minutes of its 30 October rate decision. We don’t expect it to be a meaningful release for markets, as the Governing Council’s neutral view has been widely confirmed in post-meeting speeches.
GBP: Sterling Welcomes the Budget
Sterling rallied on the budget yesterday. The positives came in the form of higher fiscal headroom (less pressure on fiscal credibility) plus the fact that the UK government did not need to raise taxes as much as expected next year. Helping the latter point was the Office for Budget Responsibility’s reassessment of the current fiscal hole at a mere £6bn.
Concerns over the credibility of back-loaded tax hikes may have to be left to another day. And we do not think the government’s spending plans, running into a 2029 election, look credible. Equally, we do not think sterling has to rally too far now, either. Our take is that this Budget does not have major implications for the BoE cycle, but at the margin, lower energy prices could give the BoE a little more confidence to cut.
With sterling not particularly cheap on a trade-weighted basis, we still think three BoE cuts over the next seven months could send EUR/GBP a little higher. As such, we expect EUR/GBP to meet demand in the 0.8700/8750 area and work its way back to 0.8850 ahead of a BoE rate cut on 18 December.
Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user’s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more