UBS: The pound is expected to strengthen against the dollar and remain stable against the euro.

Themis Themistocleous, Chief Investment Officer for EMEA at UBS Global Wealth Management, stated in a webinar that due to the Bank of England possibly being more cautious in cutting interest rates compared to the Federal Reserve, the British pound may strengthen against the US dollar next year. He noted that UK inflation is stubborn and the fiscal environment is complex, which means the Bank of England will cut rates gradually. UBS predicts that the Bank of England will only cut rates twice more by 2026, leading to UK government bond yields remaining higher than those in the US and the Eurozone in the coming months. UBS forecasts that the GBP/USD will rise to 1.36 by mid-2026. Compared to the euro, taking into account the fiscal challenges in the UK and potential fiscal stimulus in Germany that may drive economic growth in the Eurozone, the pound is expected to remain stable against the euro.