Key Moments
- UK data released Thursday showed stronger-than-expected monthly GDP for November, improved industrial production, and rising housing market optimism.
- ING sees further downside risk for EUR/GBP support at 0.8645/55, with a potential move toward 0.8600 next week tied to positioning and upcoming UK CPI data.
- ING projects Bank of England rate cuts in March and June, diverging from current market pricing of cuts in April and December.
Market Reaction to UK Macro Data
The British pound still has scope to extend its recent correction against the euro, according to a fresh assessment from ING, even after a batch of stronger UK economic indicators released Thursday.
The latest figures showed that monthly UK GDP for November outperformed expectations. Industrial production also exceeded forecasts, while sentiment in the housing sector improved as estate agents reported greater confidence about future sales.
Sterling Positioning and Ongoing Correction
Despite the upbeat macro and housing data, ING highlighted that asset managers remain notably underweight in sterling. This positioning leaves room for additional currency adjustment as investors reassess their exposure in light of the recent data.
ING argued that the sterling correction that began in November likely has not yet run its course. The bank pointed in particular to the upcoming December UK CPI release, scheduled for next week, as a potential catalyst for further moves if it delivers upside surprises.
EUR/GBP Technical Levels Under Scrutiny
Given the current setup, ING sees key EUR/GBP support at 0.8645/55 as increasingly fragile, with rising odds of a move lower to 0.8600 next week. The institution views such a level as strategically important for investors seeking to position for possible sterling softness around March.
| Factor | Detail |
|---|---|
| Current positioning | Asset managers hold substantial underweight exposure to sterling |
| Key EUR/GBP support zone | 0.8645/55, seen as vulnerable |
| Potential next target | 0.8600, potentially as early as next week |
| Risk-management view | Level around 0.8600 viewed as an opportunity to hedge against expected sterling weakness in March |
Monetary Policy Expectations Diverge
On the policy front, market pricing currently reflects expectations of Bank of England rate reductions in April and December. ING, however, anticipates a faster pace of easing, projecting that rate cuts will occur in March and June instead.
This difference between market-implied and ING-forecasted timelines for monetary policy shifts adds another layer of complexity for investors assessing the outlook for sterling and UK assets in the months ahead.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
