UBS Forecasts Stable Outlook with Slight Downward Bias for EUR/GBP Rate
UBS, a leading financial institution, has recently shared its insights on the future outlook for the EUR/GBP exchange rate. According to UBS, the rate is expected to remain stable with a slight downward bias in the coming months. This stability is attributed to the similar monetary policy cycles of the Bank of England (BoE) and the European Central Bank (ECB).
The BoE’s recent decision to cut rates by a narrow margin of 5 to 4 suggests that future rate cuts may be gradual. UBS does not anticipate another rate cut until the BoE’s November meeting. One key difference between the two central banks is the higher UK yields compared to the Eurozone, giving the British pound a carry advantage.
UBS predicts that this yield gap will persist, leading to a stronger pound relative to the euro in the near future. However, the possibility of accelerated rate cuts by the BoE may prevent a significant drop in the EUR/GBP rate. In terms of investment considerations, UBS expects the EUR/GBP to remain rangebound, with a slightly lower spot rate expected in the short term.
The GBP is seen to have an advantage over the euro, as long as there are no major policy changes. UBS has set boundaries for the EUR/GBP within the 0.835 to 0.875 range, a range that has been maintained over the past year.
In conclusion, investors can expect the EUR/GBP rate to remain relatively stable with a slight downward trend. The British pound may have an edge over the euro due to higher yields, but potential rate cuts by the BoE could impact the exchange rate. It is important for investors to monitor central bank decisions and economic indicators to make informed decisions about their investments.