What's Happening?
HSBC has forecasted a decline in the GBP/EUR exchange rate, predicting it will fall to 1.1365 by the end of 2025. The bank maintains a negative outlook on UK fundamentals, citing risks to the Pound over the medium term. HSBC's analysis focuses on fiscal policy and the upcoming Autumn budget, projecting GDP growth to remain at 1.0% for both 2025 and 2026. This weak growth is expected to undermine government revenue, potentially necessitating further tax increases.
Why It's Important?
The forecasted decline in the GBP/EUR exchange rate could have significant implications for the UK economy, affecting trade and investment. A weaker Pound may increase the cost of imports, impacting consumer prices and potentially leading to inflationary pressures. Businesses operating internationally may face challenges in managing currency risks, while the government may need to adjust fiscal policies to address revenue shortfalls. The prediction underscores the importance of economic stability and effective policy measures in maintaining investor confidence.
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