The Pound fell 2% against the US Dollar after the Bank of England raised rates by 75 basis points on Thursday. Economists at UBS expect the GBPUSD to inch closer to 1.10 in the coming months.

The challenging UK economy casts a cloud over Sterling

“The Pound's fall partly reflected dovish aspects to the policy statement, which indicated that rates could ‘peak lower than priced into financial markets.’ In addition, two of the nine members of the Monetary Policy Committee favored smaller rate rises, with one wanting 50 bps and another 25 bps.” 

“The Pound's vulnerability also reflects the nation’s challenging macroeconomic environment. There is a high likelihood that the UK will enter a recession in the coming quarters while inflation stays elevated.”

“We think that GBPUSD is likely to swing around 1.10 in the coming months.”