Gbpeur Forecast Mufg

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Gbpeur Forecast Mufg

GBP/EUR Will Be Near 1.11 In Early 2027 - MUFG

MUFG's latest forecast about GBP/EUR reveals the pair will be near 1.11 by Q 2027. Overall, this is a bearish forecast and reveals that GBP will lose its value against EUR in the upcoming quarters.

The GBP/EUR is under the influence of higher energy prices and the risk-off sentiment. Also, the UK yields and the worsening risk appetite continue to steer the GBP/EUR lower.

Higher Yields To Only Provide Short-Term Support

MUFG added that the higher yield has provided a buffer to the GBP. However, it will not be enough to support the Pound in the long term.

They commented on how the yield support alone is not enough to sustain a stronger GBP. That's why the medium-term forecast for the GBP/EUR remains bearish.

With all things considered, the bank thinks GBP/EUR will be trading near 1.11 by Q1 2027. The bank also added that the UK economy depends on energy imports.

Another surprising thing is the lack of refining capacity, which puts the economy into a very vulnerable position. So, if the energy prices remain high, it would also spell trouble for the Pound.

Also, the higher bond yields will eventually undermine the economic activity in the UK. On top of that, this will also raise the risks of stagflation in the UK economy, as inflation is also high.

The 12-month range for the GBP/EUR is 1.1280 - 1.1612. However, MUFG's forecast shows that the pair will eventually break out of that range and settle below it.

The Bank of England is forecasting around 2 more rate hikes by the end of 2026. However, MUFG thinks the central bank will only go ahead with 1 more rate hike this year.

MUFG added that the Bank of England doesn't have too much room to go with two rate hikes. The inflation risks are real, but the central bank also has to think about economic growth.

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