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0941 GMT – Sterling’s gains ahead of Wednesday’s U.K. budget are less about conviction and more about positioning, Convera strategist George Vessey says in a note. Investors have been running heavy sterling short positions over the last few months, expecting it to fall. This reflects the sizeable risk premium embedded into the currency, he says. “With the budget looming as a potential inflection point, traders are reluctant to be caught flat-footed by any upside surprise.” With so much negativity priced into sterling of late, there is potential for a relief rally if the budget is considered fiscally credible, he says. Sterling rises 0.1% to $1.3174. The euro falls 0.1% to 0.8784 pounds. ([email protected])
Euro Remains Undervalued, Has Scope to Rise
0921 GMT – The euro remains undervalued even after its recent recovery against the dollar, ING’s Francesco Pesole says in a note. “This signals upside risks persist, but we must also note that the average misvaluation of the past three months has been 1% in the pair, signalling a clear tendency to trade on the cheap side.” Hopes for a Ukraine peace deal are likely helping the euro, although they are not the main driver as increased U.S. interest-rate cut bets are weighing on the dollar. A breakthrough in peace talks on Ukraine in the coming days could lift the euro to $1.17, Pesole says. The euro rises 0.1% to $1.1578 after earlier reaching a one-week high of $1.1595, LSEG data show. ([email protected])
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