How far should sterling now rally? Economists at ING believe that the GBP/USD pair is unlikely to trade above the 1.15 level.
Do not chase sterling higher
“While there may be some more fiscal positives to come were the Conservatives to look at a windfall tax on the energy companies, we suspect cable will struggle to sustain gains over 1.15 this month.”
“News that the UK government is shortening the period of the Energy Price Guarantee to six months from two years may not be greeted well by the consumer and also raises the prospect of UK inflation staying higher for longer.”
“One month GBP/USD implied volatility (now at 16% versus a peak near 22% in late September) may struggle to return to pre-crisis levels of 12% – confirming that trust is hard won and easily lost.”