EURGBP Stable Exchange Rate Expected

UBS expects EURGBP to stabilize at 0.86 through mid-2027 as UK political uncertainty fades and economic data surprises to the upside. The GBP is preferred for total returns due to its 2% yield carry advantage over the EUR.

Key Takeaways

• 1.UK political uncertainty from local elections and a potential leadership challenge by Andy Burnham is expected to fade, with limited changes to fiscal policy anticipated.
• 2.UK economic data is outperforming expectations, while softer inflation reduces the immediate pressure on the Bank of England to hike rates in June.
• 3.EURGBP is forecasted to stabilize at 0.86 through June 2027, with the British pound offering better total returns due to its 2% yield advantage.

Table of Contents

• UK politics: Is the worst behind us?
• ECB likely to hike in June
• Investment considerations
• CIO Forecast- EURGBP
• EURGBP remains in a tight range with a downside bias
• UK economic data have surprised to the upside
• Appendix

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