Investing.com — UBS strategists forecast last week the British pound will gradually strengthen against the Swiss franc in coming months, supported by the Bank of England’s hawkish stance and a significant interest rate advantage.
has recovered to levels seen before the US-Iran conflict, according to a report from UBS Chief Investment Office dated April 30. The pair initially fell sharply when the conflict began as investors sought safety, but has since rebounded on improved risk appetite and stronger-than-expected UK economic data.
The BoE’s recent policy vote showed eight members in favor of holding rates steady, with one dissenting in favor of a hike. UBS expects the central bank to maintain its tightening bias while the Swiss National Bank is widely expected to keep rates unchanged, leaving a yield gap of around 4% in favor of the pound.
UBS forecasts GBPCHF will reach 1.08 by September and hold that level through March 2027, up from 1.06 currently. The bank’s purchasing power parity calculation suggests a long-term equilibrium value of 1.13.
UK elections scheduled for May could trigger near-term volatility and temporary pound weakness, UBS said. However, the bank does not expect lasting political instability as no clear Labour leadership challengers have emerged.
The report identified resistance around recent highs of 1.07 to 1.08, with downside support near recent lows of 1.03.
Risks to the forecast include renewed geopolitical tensions or sharp equity market declines, which would favor the franc. A resolution of global conflicts or a more hawkish BoE could push the pair higher than expected.
The strategists noted UK economic data has recently surprised to the upside, citing the Citi Economic Surprise Index.