UBS expressed a positive view on the British pound, citing recent comments from the new British Chancellor, Rachel Reeves, on the government’s growth agenda. Reeves highlighted the limited scope for public spending and indicated that the government would focus on supply-side reforms to boost investment and growth.
UBS noted that while similar commitments have been made by past UK governments, the current emphasis on a dynamic approach to change could be beneficial to the UK economy.
The brokerage firm also highlighted Britain’s political stability, saying the country will have the most stable government among the G7 countries over the next five years.
This stability is expected to attract structural flows into the British pound, according to UBS, marking a positive shift for the currency in the post-Brexit voting era. Due to these factors, UBS maintains its exchange rate target at 0.8400.
The forecast is based on the combination of Britain’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 could in turn support growth in the UK economy.
UBS’s outlook presents a scenario where the British pound could appreciate against the euro, possibly reaching the 0.8400 level. This would indicate a significant appreciation of the pound against its European counterpart.
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