Sterling has outperformed the euro this week despite broader dollar strength, with the largest drop occurring on Tuesday during a market deleveraging phase, according to ING. The currency's gain stems from positioning factors: asset managers hold large net short sterling positions while maintaining long euro exposures. Repricing at the short end of the interest rate curve, as the market prices out Bank of England easing, has also supported the pound.

As of Thursday, GBP weakened against the dollar slightly, with EUR/GBP falling to 0.8699. ING's UK economist, James Smith, pushed back the BoE rate cut forecast to April from March but maintains expectations for two cuts this year, which could push EUR/GBP toward 0.88 or higher. However, sterling appears poorly positioned should bond markets face renewed pressure, a scenario mirroring 2022 events that led to the gilt crisis later that year.