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Investing.com -- The British pound has been quietly outperforming as U.K. debt market conditions stabilize following last week’s bond market volatility, according to ING analysts.
Despite previous predictions that the U.K. would require an International Monetary Fund bailout, gilt auctions have been proceeding well, demonstrating that the U.K. can service its debt when priced appropriately.
A £4 billion auction of six-year gilts is scheduled for Wednesday.
The EUR/GBP exchange rate remains contained within a 0.86-0.87 range.
ING analysts note that sterling’s high-yield status makes it expensive to sell, allowing the currency to maintain its position at current levels unless negative news emerges.
Next week’s Bank of England rate meeting is expected to provide support for the pound, barring any significant downside surprises in upcoming jobs and inflation data.
ING maintains its forecast that EUR/GBP will end the year near 0.87 and GBP/USD will approach 1.38, with dollar weakness being the dominant factor in the latter pair.