The British pound may have further room to correct against the euro, according to ING analysis. This potential currency movement coincides with surprisingly positive UK economic data released Thursday, including stronger-than-expected monthly GDP and industrial production figures. The housing market also showed signs of improvement, with estate agents expressing increased optimism about future sales volumes.

Asset managers currently maintain significant underweight positions in sterling, creating potential for continued currency weakness. ING analysts believe the correction that began in November likely has further to run, particularly with December UK CPI data scheduled for release next week. This could push the GBP/EUR pair toward the 0.8600 support level.

Given current market positioning, ING suggests support at 0.8645/55 appears vulnerable to a breakdown. The bank views this potential level as an opportunity to hedge against sterling weakness expected in March. While financial markets currently price in Bank of England rate cuts in April and December, ING forecasts earlier monetary policy easing in March and June instead.