The Pound Sterling (GBP) has rebounded as gilts bounced back after Tuesday’s headline-grabbing slump, which was entirely in line with global bond moves, ING's FX analyst Francesco Pesole notes.

EUR/GBP remains more likely to trade 0.870

"Yesterday, Bank of England Governor Andrew Bailey confirmed the more cautious MPC stance on further rate cuts. With the UK Autumn Budget event now set for 26 November, markets have trimmed down chances of a cut at the 6 November meeting even further to 5bp, but have slightly increased those for a December cut (13bp). That follows the rationale that the announcement of growth and inflation-dampening tax rises can tilt the balance back to the dovish side for the MPC."

"We still believe the BoE will cut before year-end, and while we thought yesterday’s GBP drop was overdone, the coming months will likely see multiple headlines and speculation about the content of the Budget, with elevated risks of adverse spillover into gilts and sterling. As markets may not feel comfortable completely wiping out December cut bets due to the Budget impact itself, the pound may not count on much more support from front-end rates."

"Even if that may not play out in the next few days just yet, EUR/GBP remains more likely to trade 0.870 or above rather than below 0.860 into the November Budget event."