UBS Sees Sterling Rebound Against Dollar Amid Peak Hawkishness
Foreign currency strategists at UBS predict that the British Pound (GBP) will recover against the US Dollar (USD), reversing its recent losses. According to their forecasts, the GBP/USD exchange rate is expected to reach 1.38 by December, with a potential increase of around 6.4% from its current level.
UBS argues that investors have become too aggressive in pricing further US interest-rate increases, which has contributed to the Sterling's decline. However, they expect this trend to reverse as market sentiment improves and global PMIs remain solid.
The bank's forecasts also indicate that the Bank Rate will reach 4.00% by December and 4.25% from March through September 2027. Nevertheless, UBS believes that there are limits to the tightening cycle, expecting only one more rate hike from the Federal Reserve (Fed).