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From a technical perspective, the pound remains vulnerable to further weakness against the euro.
The pound to euro exchange rate (GBP/EUR) has recovered a portion of Tuesday's losses; however, more work needs to be done if the pair is to flip its fortunes and shift into an uptrend.
The pair rises to 1.1517 at the time of writing, having been as low as 1.1480 on Tuesday, when the UK led a global bond market rout over fears government debt was set on an unsustainable trajectory and that the Treasury would respond with more painful tax rises in November.
The midweek recovery is welcome for those wanting a stronger pound, but they would have wanted to see the pair recover the full extent of the Tuesday fall, as this would have suggested the decline was a 'flash in the pan'.
Pound Sterling Live's leader for Thursday reports that strategists see some scope for the pound to stabilise following a tough start to September, with a period of grace being offered by the Treasury's decision to announce its budget on November 26, which is very late in the year for a budget.
Although there is scope for stabilisation from here, we must still respect that technical signals remain consistent with a steady grind lower as opposed to a collapse, with the first target being the lows at 1.1481 and then the range lows of 1.1413.
The above chart shows an updated version of Monday's Week Ahead Forecast chart, which is when the black arrow was drawn. That prediction is playing out nicely, albeit the fall to target was a lot quicker than anticipated.
The speed of the decline left GBP/EUR too far removed from its nine-day exponential moving average, and the subsequent pullback to higher levels looks to be consistent with a mean reversion that allows the exchange rate to keep in touch with the EMA and unwind some oversold conditions.
So, unfortunately for those wanting a stronger pound, the rebound looks to be a technical retracement at this juncture. (If you're concerned, consider locking in current rates to cover a portion of international transfer budget).
The pound's fundamental troubles are not going to disappear as they rest largely with fears about the trajectory of UK government debt, which has become increasingly expensive (bond yields have been rising).
"The UK faces a difficult equation, with persistent inflation, high interest rates, high public debt, weak growth and extensive investment needs – and the risk of a worsening situation should not be neglected," explains Amanda Sundström, FX Strategist at SEB.
Jane Foley, Senior FX Strategist at Rabobank, says her expectation is that the pound steadily grinds lower against the euro from here.
"The UK is clearly not the only country facing a difficult fiscal prognosis but, since it also runs a sizeable current account deficit, there is potential for the exchange rate to be particularly sensitive to bad fundamental news," she explains.
The UK imports more than it exports, meaning its international bank account shows it to be net debtor. (Compare this to Japan which has higher domestic debt but is a net international creditor courtesy of its current account surplus).
"We expect GBP to remain on the back foot," says Foley.
In November the government is expected to announce significant tax rises in an attempt to plug a black hole that has emerged in the public finances over the course of the past year.
Fears of tax hikes will keep consumers and businesses wary, limiting the UK's economic growth potential and keeping Sterling in check.
"Any efforts by Reeves to improve UK productivity and cut public spending around welfare would likely be taken positively by the market. Although the latter would clearly be tough, any absence of spending cuts could ensure that jitters remain in gilts which would enhance the vulnerability of GBP," says Foley.