“We expect GBP/USD to come under pressure this year,” Thomas Flury, head of currency research at UBS Wealth Management, and Dean Turner, UK economist at UBS Private Banking, wrote in a note reported by Bloomberg.
“The eurozone and the UK are likely to experience energy supply shortages this winter,” the strategists said.
UBS cut its outlook for the British pound to $1.15 in the fourth quarter of 2022, from a previous estimate of $1.26 per pound.
If UBS’s target proves correct in its call for $1.15, GBP will have fallen to levels seen in the early days of the pandemic and to the second-lowest level ever, after a 1985 low, according to Bloomberg estimates .
Most analysts expect the pound to be relatively stable at around $1.22 by the end of the year, but UBS believes that the Bank of England’s rate hikes will not support the British currency for long with the looming crisis in the winter, when the UK energy bills will rise again.
UK energy bills are set to rise more than expected this winter, with many households struggling to pay after Russia further cut gas supplies to Europe, sending gas and energy prices soaring for the winter and for next year on the rise, consultancy BFY Group said last week.
“Huge sections of the British public will not be able to pay their bills this winter. Average two-parent families will be fuel-starved,” said Gemma Berwick, Senior Advisor at BFY Group, as reported by the Telegraph.
By Charles Kennedy for Oilprice.com
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