ING: The British Pound Remains Vulnerable, Political Risks Not Fully Priced in by the Market

Golden Ten Data reported on May 14 that ING analyst Francesco Pesole stated in a report that the British pound still appears relatively fragile. Although UK Prime Minister Keir Starmer faces risks of leadership challenges, the risk premium priced into the pound remains limited. He pointed out that, according to a short-term overvaluation model for EUR/GBP, the current risk premium is about 0.3%. Pesole said, "This suggests that the market is not particularly worried at the moment, but if UK government bonds are impacted by new political developments, downside risks for the pound remain high." Meanwhile, he expressed skepticism about Thursday's upcoming UK economic data. Figures show that Britain's first-quarter economic growth accelerated to 0.6%, but ING believes this may reflect more of a seasonal adjustment issue rather than a genuine improvement in economic momentum.