Gbpeur To Decline Ubs

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Gbpeur To Decline Ubs

Gbp/Eur To Decline Towards 1.1365 In Next Twelve Months

UBS forecasts that the GBP/EUR pair will decline to 1.1365 handle in the next 12 months. This is a long-term forecast which shows that the Pound will weaken against the Euro in the coming months.

It's worth noting that GBP/EUR has failed to cross the 1.16 handle multiple times. So, the path of least resistance for the Pound is now towards the 1.14 and then the 1.1365.

Boe Maintains A Cautious Stance

UBS commented that the higher UK yields will not provide much support to the GBP. Instead, the fears of stagflation will continue to be the dominant theme in the market.

If we think about it, higher rates should support the Pound in the coming quarters. However, that's not what the UBS is forecasting in the case of GBP/EUR.

For now, the BoE has maintained a very cautious stance when it comes to the rate cuts. However, the rate cuts are coming one way or another, and it will be bad news for the Pound.

It seems that the market players are more worried about the situation of the UK's economy as opposed to the interest rate policy.

UBS added that the economic situation is not expected to improve in the medium term. This was also confirmed by the latest GDP data, which showed some serious concerns.

So, with all the economic risks, there's only so much support the Pound could get from the high yields. The bank also added that the UK fiscal policy carries some risks due to the Autumn budget.

There's no doubt that the UK government has already lost some of its credibility. So, it will need to take some measures and ample time to build up confidence.

The bottom line is that Pound will remain under selling pressure during the next 12 months. And it makes total sense given that the Eurozone is supporting its economy with fiscal stimulus.

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