The British pound declined in opposition to the US greenback in opposition to the background of the overall strengthening of the US forex, UBS analysts say. On the similar time, the pound lagged barely behind different European currencies, which led to a slight improve within the EUR/GBP pair above the 0.86 degree.
The financial institution’s specialists report that the newest macroeconomic information from the UK point out a slowdown in financial progress and a weakening labor market. Nonetheless, excessive inflation and regular wage progress constrain the Financial institution of England’s capacity to rapidly ease financial coverage.
UBS expects the Financial institution of England to chop the speed solely twice by 25 foundation factors by the top of the 12 months, which is consistent with market expectations. In opposition to the background of persistent rate of interest differentials, the pound stays enticing for a carry commerce, particularly in pairs with low-yield currencies such because the Swiss franc.
The funding financial institution’s analysts nonetheless suggest the GBP/CHF carry commerce technique, and the pound’s fall beneath 1.33 is described as a possibility to hedge greenback positions. Within the medium time period, the financial institution forecasts the GBP/USD pair to rise to 1.40 by mid-2026.
On the similar time, it’s anticipated that the potential for additional progress of the pound is proscribed. Within the brief time period, UBS suggests promoting GBP/NOK with progress above 13.90, and in addition attracts consideration to the doable strengthening of the Norwegian and Swedish krona in opposition to the pound.
