Gold prices tick higher on fresh U.S. tariff threats, Fed rate cut hopes
Investing.com - The British pound’s decline against the U.S. dollar in the past week largely aligned with the broader USD rebound, according to a new UBS analysis. The investment bank noted that the pound also slightly underperformed against its European peers, with the EUR/GBP exchange rate rising modestly above the 0.86 mark.
Recent UK economic data indicates slowing growth and a weakening labor market, UBS reported. Despite these conditions, the bank argues that with wage growth and inflation remaining at uncomfortably high levels, the Bank of England has limited scope for aggressive monetary easing.
UBS forecasts only two additional 25 basis point rate cuts from the Bank of England by year-end, which aligns with market consensus. The bank expects these modest rate adjustments will maintain the pound’s attractive carry prospects against most currency peers.
For currency traders, UBS continues to favor CHF-funded GBP carry trades given the elevated interest rate differentials. The bank sees GBP/USD reaching 1.40 by mid-2026 and recommends using the recent pullback below 1.33 as an opportunity to hedge USD positions.
The investment bank identified limited yield pickup opportunities for GBP investors in the current environment. UBS’s preferred strategy involves selling upside risks in GBP/NOK above 13.90 over the next month, while also noting upside potential in other European risk proxies like NOK and SEK against the pound across their forecast horizon.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.