Gbpeur Will Be Bearish

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Gbpeur Will Be Bearish

Gbp/Eur Will Remain Bearish - Mufg

MUFG has issued a bearish forecast for the GBP/EUR pair. They believe the path of least resistance for GBP/EUR is downside and the next bearish target is 1.1240.

The bearish forecast from MUFG is for the long term and shows that the fundamentals are stacked against the GBP. Even now, the GBP/EUR pair is at multi-week lows while there's a forecast for more downside.

Boe Is Expected To Cut Rates

key reason for this bearish forecast has to do with the fiscal policy of the UK and Europe. The MUFG has some serious concerns about the UK's fiscal policy and is thus favoring the Euro.

According to MUFG, the government is highly likely to tighten its fiscal policy before the end of the year. In addition, they are also likely to increase taxes in an effort to get some fiscal headroom.

This increase in taxes will help the government collect more money. However, this will also come at the price of slower growth, which will force the Bank of England (BoE) to cut the rates.

And everyone knows that the BoE rate cuts will not be good for the GBP currency at all. But it could provide some support to the UK's economy in the short to medium term.

Just recently, the central bank has decreased the amount of bonds it wants to sell in the next 1 year. However, there are also some technical changes that will ultimately increase the amount of bond sales.

So, MUFG thinks that this increase in sales will also send the long-term bond yields higher. This will translate into higher costs for the debt servicing.

At the same time, the UK government is now also struggling with a higher budget deficit. That's why they are now thinking of increasing the taxes to bridge some of that gap.

So, all of this is connected, and the end result of this will be a bearish cycle in the GBP/EUR pair. So, it's safe to say that the next target for the GBP/EUR is 1.1240.

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