Sterling faces downside risks as concerns over growth arise in the UK – MUFG

MUFG Bank’s GBP optimism is fading after a solid run since the start of the year. 

GBP gains but downside risks 

A weaker US Dollar will help support GBP/USD and while higher rates to fight inflation could prove supportive for the Pound, there are risks going forward that this could create concerns over growth. 

With UK yields set to ease as the BoE underdelivers current expectations, GBP weakness could be evident versus EUR.

EUR/GBP Q2 2023 0.8650 Q3 2023 0.8750 Q4 2023 0.8850 Q1 2024 0.9000

GBP/USD Q2 2023 1.2600 Q3 2023 1.2910 Q4 2023 1.2990  Q1 2024 1.2670