UBS expects the pound to rise by December due to large short bets by traders. The bank forecasts the pair at 1.39 dollars by March 2027.
UBS expects the pound sterling to strengthen by December. According to the bank, significant short positions by traders against the British currency leave room for growth.
On Friday the pound traded at 1.3430 dollars, gaining 0.40 percent. The Bank of England, UBS believes, will start a series of rate hikes as early as next week and add another hike in the first quarter of 2027. UK economic data continues to beat forecasts, and positions in pound futures remain heavily short.
The US Federal Reserve left rates at 3.75–4 percent. The decision passed 10 votes to 2, with only two committee members voting for an immediate hike. Markets are pricing in about three additional Fed rate hikes, while UBS expects two. Lower rate expectations in the US could put pressure on the dollar.
UBS forecasts the pound/dollar pair at 1.39 by March 2027 and 1.41 in the second half of 2027. Initial resistance is seen around 1.38, followed by a move toward 1.40–1.41. Support is located around 1.33, then 1.32.
The main risks to the forecast are stronger US economic growth or more Fed rate hikes than the bank expects.
The pound was heading for a third consecutive weekly gain. It closed at 1.3235 dollars on 9 October, 1.3329 on 16 October and 1.3373 on 23 October. Friday’s price was the highest in October and surpassed the previous peak of 1.3421 set on 22 October.
The euro, according to UBS, will stay around 0.84 pounds, moving to 0.85 in subsequent quarters. The next significant support level is 0.8350, resistance 0.8620. The euro is currently below the lower boundary. Pressure on the euro comes from concerns over France’s budget and public finances. The bank sees scope for the euro to recover positions in 2027 if France adopts a budget by year-end.
The European Central Bank, UBS expects, will raise rates in December — a step markets have already almost fully priced in. An early departure by ECB President Christine Lagarde, in the bank’s view, will have limited impact on the euro.