Gbpeur To Fall Ubs

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Gbpeur To Fall Ubs

Gbp/Eur To Fall During Next Twelve Months - Ubs

According to UBS, the GBP/EUR pair is expected to decline towards 1.1365 over the next 12 months. That means the overall trend during that period will be bearish as the pair is still above 1.15.

On the way up, the long-term resistance levels for GBP/EUR are 1.17 and then 1.20. But given the interest rate difference between the two economies and other factors, the path to least resistance is downside.

Uk Economy Going Through Stagflation

UBS added that the UK yields are higher than the Eurozone. However, it will not offer much protection to the GBP due to the stagflation fears in the UK. That's why the 12-month forecast for the GBP/EUR is bearish.

However, they also noted that GBP might gain some support due to the higher rates. The chances of that will increase if the Bank of England continues to hold the interest rate steady.

Meanwhile, the GDP data that's been coming as of late is still very strong. But, it's also a reality that the UK is going through stagflation, which means the medium-term outlook remains shaky.

In an environment like this, the GBP can only go so far, even with higher rates. In short, the higher rates will not support the GBP for much longer.

The UK's fiscal policy also faces some major risks, which is yet more bad news for the GBP. On top of that, the UK government is also struggling, which is yet more bad news for the Pound.

So overall, the UBS believes that the Pound will stay under the selling pressure against the Euro. In fact, we might witness the same thing happening in other Pound pairs.

It's also worth noting that the Eurozone is going through a period of sustained fiscal stimulus. So over the next 12 months, this will propel Europe's economy, while the opposite might happen in the UK's case.

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