UBS gives the most optimistic forecast for GBP at the end of 2020
According to UBS Global Wealth Management strategists, by the end of the year the pound will grow to US$1.35, which is clearly more optimistic forecast than consensus. Forecast implies a 10% rally from current levels of about $1.22 and contrasts with the market opinion, as other analysts expect the pound to fall. For comparison, the median estimate of the British currency at the end of the year in a survey of forecasters Bloomberg is US$1.26.
Conversations about negative interest rates in Great Britain and renewal of fears about Brexit without the trading agreement can represent only short-term risks for GBP, while the probability of negative rates has increased, believe strategists led by Mark Hefele, chief investment officer of UBS Wealth.
Central bank is likely to announce a £100 billion increase in
Quantitative easing at its June meeting on monetary policy, he added. Fears about Brexit are exaggerated, as "the likelihood that Britain will exit the transition period at the end of the year without a trade deal is relatively small". There will be either a minimum deal or a short extension (transition period).
The strength of US dollar will weaken, as it will be less in demand, given almost zero interest rates in the United States. Federal Reserve's measures to reduce the stress associated with US dollar financing should also put pressure on the dollar. Federal Reserve policy is likely to remain expansionary longer than Bank of England policy.