1. Newsroom
  2. Change of fortune for the British pound
Menu
Insight 08.06.2020

Change of fortune for the British pound

Change of fortune for the British pound

Our Global Head of Forex Strategy, Peter Kinsella, discusses our updated outlook on sterling



The outlook for GBP exchange rates has become much more ominous. The COVID-19 pandemic has led to a significant decline in growth and consequently an increase in government indebtedness. The Bank of England (BoE) has cut interest rates to 0.1% and restarted its quantitative easing programme, as had been expected by many analysts. However, the BoE is said to be seriously considering the possibility of introducing negative deposit rates. This would be the first time that a country with a large current-account deficit applied such a policy. We think that this would be a highly negative development for GBP exchange rates, due to the importance of portfolio flows in balancing the UK’s current-account deficit.

A second risk looming on the horizon is the ongoing state of EU–UK trade negotiations. EU Chief Negotiator Michel Barnier has noted that little substantive progress has been made in the talks. Consequently, we think that the chances of the EU and the UK failing to agree to a trade deal are around 50:50. This risk will crystallise as we move into late June and nearer to the UK’s self-imposed negotiation deadline. As a result of these factors we now anticipate that sterling will weaken over the coming weeks and, at a minimum, we expect that GBP exchange-rate volatility will increase materially.

Our expertise

Peter_Kinsella_150x150.jpg
Peter Kinsella
Global Head of Forex Strategy

Expertise

Swiss & Global Equities

Why Swiss equities now? This market offers equity investors the stability and agility they need to navigate this volatile period. 

Read more
Expertise

European Equities

European equities offer unrivalled opportunities in terms of breadth of sector and market exposure.

Read more

Most read

Insight 01.10.2020

COVID-19: UBP keeps you up to date

Since this coronavirus appeared, UBP has provided its clients with guidance and support as we all tackle this unprecedented global health crisis. We give you regular updates on everything from our own safety protocols and the recommendations issued by the authorities to our experts’ latest analysis on the effects of the pandemic on the world economy and financial markets.

Insight 30.06.2020

UBP Investment Outlook 2020 Reset

The Global Economy at the Crossroads

Insight 24.06.2020

Market turmoil brings new opportunities for pragmatic investors

March 2020 was difficult time for many investors, as COVID-19 spread across Europe and the US, leading to sharp sell-offs in fixed-income credit markets. While such market turbulence is not to be welcomed, its occurrence can create opportunities.


Further reading

Insight 21.11.2020

UBP Investment Outlook 2021

A Brave New World

Insight 09.11.2020

Will Chinese domestic consumers become the next global growth engine ?

China revealed the key themes of its upcoming 14th Five-Year Plan (14-FYP) and long-range objectives through the year 2035. The Fifth Plenum took place amid signs of stronger economic recovery, with better performance spilling over onto the domestic sector.
Insight 02.11.2020

Hidden gems in Swiss & European small caps

Small and mid caps have traditionally recorded higher growth rates and investment returns over the long term than large caps: it is easier to generate a dynamic growth rate from a smaller base. Swiss and European small and medium-sized capitalisations – so-called ‘SMID caps’ – also tend to provide investors with ‘pure play’ exposure to major secular growth trends.