Rabobank sees sterling gains fading, forecasts EUR/GBP at 0.87 near term, 0.88 in 6 months

Rabobank sees sterling gains fading, forecasts EUR/GBP at 0.87 near term, 0.88 in 6 months

• Bank of England to deliver another rate cut in November

Rabobank warns UK stagflation risks could stall sterling rally.

Rabobank says that with UK inflation and wage growth still running hot, even growth figures in line with forecasts could stoke fears of stagflation and temper investor appetite for the pound.

The bank’s central scenario is for the Bank of England to deliver another rate cut in November, a move it expects will sap momentum from sterling’s recent gains. Rabobank forecasts EUR/GBP will hover near 0.87 over the next one to three months before drifting toward 0.88 in six months’ time.