UBS maintains a bearish outlook for EUR/GBP, targeting 0.8500 by year-end as the Bank of England balances stable inflation expectations against the risks of elevated energy prices and fiscal policy shifts.
UBS maintains a bearish outlook for EUR/GBP, targeting 0.8500 by year-end due to expectations of favorable capital flows supporting the British pound. While the bank anticipates a cautious tone from the Bank of England regarding interest rates, the overall constructive stance on sterling persists despite potential tactical weakness leading up to the Autumn Budget.
UBS targets the pair at 0.8500 by year-end.
The pound faces pressure leading into the 28 October Autumn Budget due to concerns over public finances and higher gilt yields.
UBS economists forecast the Bank of England will maintain interest rates at 3.75% in September, citing a cautious outlook amid rising energy costs and geopolitical tensions. While the firm anticipates a steady policy path through 2026, it remains bullish on sterling, projecting the euro to slide to 0.8500 by year-end due to favorable capital flows.
UBS remains constructive on sterling, citing favorable capital flows and a steady Bank of England policy stance, which drives their year-end target of 0.8500 for the euro.
UBS expects the Bank of England to hold rates at 3.75% for the remainder of 2026, with potential rate cuts only appearing in the 2027 forecast.