UniCredit’s Sterling forecast fall 12% against Euro
The Dollar Business Bureau
UniCredit, a leading European financial group, has slashed its forecasts for Sterling (GBP) saying EUR-GBP should increase substantially by 12 percent, due to several layers of concerns on the upcoming UK-EU relationship.
Dr. Vaseileios Gkionakis, Global Head of FX Strategy at UniCredit said he has reduced his GBP forecasts, mentioning the “multiple layers of fear” on the UK relationship with EU in the future.
The given fear factor would be enough to send the exchange rate of GBP to USD at 1.20 and EUR and GBP to 0.93 by 2016-end, said Gkionakis.
“EUR-GBP should increase considerably, by 12 percent, to a high of 0.93 by the end of 2016 – a 18 percent rise than our earlier forecast of 0.79,” he said.
The highly bearish view of UniCredit on GBP over the coming 6-9 months is based on a sudden reversal of flows of portfolio as a result of the Brexit referendum vote, which should be increased further by the high possibility of a recession in the UK.
In fact, the release of the recent current account data in June-end confirmed a £32.6 billion deficit, which shows that the country remains highly dependent on foreign exchange inflows from the investors.
However, UniCredit believes that the demand for GBP will pick up on the question of valuation and the currency is expected to start reviving some of its losses against the dollar in 2017, with analysts predicting GBP-USD at 1.28 by end of next year.
The currency should also become stable against the Euro and analysts expect exchange rate of EUR-GBP at 0.90 by 2017-end, or GBP-EUR at 1.11.