Revise GBP forecasts higher; forecast EURGBP at 0.78 in 1m, 3m and year-end
In the wake of BoE Governor Carney’s Mansion House speech last week, UBS Economics has moved forward the call on the first hike by the central bank to November 2014 from February/March 2015. The resulting sharp divergence between the BoE and ECB’s policy paths will likely weigh heavily on EURGBP in coming months, extending losses incurred after the speech (Figure 1). Accordingly we revise down our forecasts for the cross to 0.78 in one month, three months and year-end. Our GBPUSD forecasts for the same tenors are also revised up to 1.73, 1.71 and 1.60, respectively.
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