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UBS shock prediction:
Fed cuts interest rates by 100 points at year-end
GBP/USD exchange rate may soar to 1.30!
UBS latest forecast: The Federal Reserve may cut interest rates by 100 basis points before the end of the year, and the pound is expected to strengthen against the dollar
UBS Global Wealth Management released its latest market outlook on August 9, stating that the pound to dollar exchange rate (GBP/USD) may strengthen significantly during the remainder of 2023.
This prediction is based on the differentiated analysis of the monetary policy paths of the two major central banks:
Expectations for the Federal Reserve to cut interest rates have increased: UBS analysts predict that the Federal Reserve will cut interest rates by a cumulative 100 basis points by the end of this year to respond to the economic slowdown and changes in inflationary pressures.
The Bank of England's interest rate cuts are smaller: In contrast, the Bank of England (BoE) is expected to cut interest rates by only 50 basis points over the same period, showing a more cautious monetary policy stance.
Based on the above differences, UBS believes that the flow of funds in the fixed income market will gradually favor the pound, pushing the pound against the dollar exchange rate to rise.
Specifically, analysts expect the GBP/USD exchange rate to reach a level of 1.30 before the end of the year, showing optimism about the relative strength of the pound.