November 20, 2024 at 03:53AM
This is via the folks at eFX.
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Synopsis:
Barclays remains optimistic on GBP, forecasting a rise in GBP/USD to 1.30 and a decline in EUR/GBP to 0.80 over the coming quarters. The outlook is supported by structural improvements, fiscal expansion, and relative resilience to tariff risks.
Key Points:
Structural Improvements:
Closer EU-UK ties provide long-term support for the UK economy and the pound, underpinning the bullish outlook.
Fiscal Expansion:
The UK government’s announced fiscal stimulus of approximately 1% of GDP bolsters domestic demand and delays the Bank of England’s (BoE) rate-cutting cycle.
Labour Costs vs. Employment:
A key uncertainty lies in whether higher labor costs will lead to inflationary pressures or reduce employment, potentially impacting supply-side dynamics.
Resilience to Tariffs:
The UK’s trade deficit in goods with the US suggests lower direct exposure to potential US tariff risks compared to the Eurozone. This creates a positive divergence for GBP relative to EUR.
Conclusion:
Barclays foresees a favorable path for GBP through 2025, supported by fiscal resilience, limited exposure to tariff risks, and structural improvements in EU-UK relations. This positions the pound for gains against both the dollar and the euro, though uncertainties around labor cost dynamics remain a factor to watch.
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This article was written by Eamonn Sheridan at www.forexlive.com.