Pound Sterling could prove something of a dark horse – ING

The Pound Sterling (GBP) has been able to hold onto its late year gains pretty well. Economists at ING analyze the pair’s outlook.

Loose fiscal, tight monetary could help GBP

There is focus on the UK budget on 6 March, where tax cuts are on the agenda. Unlike September 2022, we believe that these are credible tax cuts funded by the lower environment for debt servicing costs. They could add 0.2-0.3% to the UK GDP this year and make the case for the BoE keeping rates tighter for longer.

A 100 bps BoE easing cycle is the reason why we think GBP will be contained this year – but there are growing upside risks for GBP.

GBP/USD – 1M 1.2300 3M 1.2300 6M 1.2400 12M 1.2800