UBS optimistic on British pound, sets EUR/GBP target at 0.8400

UBS expressed a positive outlook on the British pound, citing recent comments by the UK's new Chancellor, Rachel Reeves, about the government's growth agenda. Reeves emphasized the limited scope for government spending, indicating that the administration would focus on supply-side reforms to stimulate investment and growth.

UBS noted that while similar pledges have been made by past UK governments, the current emphasis on a dynamic approach to change could be beneficial for the British economy.

The brokerage firm also highlighted the political stability of the United Kingdom, stating that it has the most stable government within the G7 nations for the upcoming five years.

This stability, according to UBS, is expected to attract structural flows to the British pound, marking a positive shift for the currency in the post-Brexit-vote era. As a result of these factors, UBS maintains its target for the EUR/GBP exchange rate at 0.8400.

The forecast is based on the combination of the UK's stable political environment and the potential positive impact of the government's commitment to supply-side reforms. UBS suggests that these elements could lead to an increase in investment, which in turn might support growth in the British economy.

The UBS outlook presents a scenario where the British pound could strengthen against the euro, potentially reaching the 0.8400 level. This would indicate a significant appreciation of the pound relative to its European counterpart.

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Source: Investing.com