2023-2024 Exchange Rate Forecasts From MUFG
Pound Sterling: BoE Forecasting Errors Increase GBP Risk Profile
MUFG has significant reservations surrounding the Pound outlook.
As far as inflation is concerned, it sees significant risks over the medium-term implications.
It notes; “The sense that the UK has a bigger inflation problem is creating downside risks for the pound that may see a period of underperformance if the evidence continues to suggest this.”
MUFG also notes problems with the bank’s model failure to forecast higher inflation.
According to the bank; “BoE Governor Bailey stated that it was no longer following the information from the model which will only exacerbate risks of policy errors and the potential for a bigger inflation problem in the UK.”
Overall, MUFG expects a mixed outlook for the Pound, especially as it expects UK yields will decline amid weak credit demand and evidence of weaker employment.
It expects the downgrading of BoE rate expectations will hurt the Pound against the Euro with EUR/GBP forecast at 0.90 in 12 months.
Pound Sterling: BoE Forecasting Errors Increase GBP Risk Profile
MUFG has significant reservations surrounding the Pound outlook.
As far as inflation is concerned, it sees significant risks over the medium-term implications.
It notes; “The sense that the UK has a bigger inflation problem is creating downside risks for the pound that may see a period of underperformance if the evidence continues to suggest this.”
MUFG also notes problems with the bank’s model failure to forecast higher inflation.
According to the bank; “BoE Governor Bailey stated that it was no longer following the information from the model which will only exacerbate risks of policy errors and the potential for a bigger inflation problem in the UK.”
Overall, MUFG expects a mixed outlook for the Pound, especially as it expects UK yields will decline amid weak credit demand and evidence of weaker employment.
It expects the downgrading of BoE rate expectations will hurt the Pound against the Euro with EUR/GBP forecast at 0.90 in 12 months.