Loosening tax rules to allow greater investment – ​​ING

The British pound (GBP) continues to perform well, notes Chris Turner, FX strategist at ING.

Heading continues for GBP/USD towards 1.35

“Most of yesterday’s decline in EUR/GBP was due to the dismal Eurozone PMI data for September. Additionally, the market is looking at some headlines coming out of the Labor Party conference in Liverpool. The focus here was on Chancellor Rachel Reeves’ comments suggesting a relaxation of tax rules that will allow for greater investment.”

“Speculation is growing that there could be a change in the accounting treatment for some of Labour’s new institutions – such as National Wealth and GB Energy – which could unlock an extra £15bn of borrowing. So far the UK sovereign CDS has not expanded on this and the concept of these plans seems credible so far.”

“But GBP has enough support at the moment without these potential investment plans. We do not see the GBP/USD positioning as particularly stretched, and given a likely softer dollar environment, the direction of travel continues to be towards 1.35. EUR/GBP impressed by removing support at 0.8340/45. Next stop, 0.8300.”