OCBC expects the pound to edge higher against the euro but weaken against the dollar, putting Thursday’s Bank of England decision in focus as markets weigh the prospects for UK interest rates.
In its Nov. 2 currency outlook, OCBC FX strategists Sim Moh Siong and Christopher Wong projected EUR/GBP at 0.83 from December 2026 through September 2027, compared with 0.8340 on Oct. 30. A lower EUR/GBP rate means the pound gains against the euro. The bank’s GBP/USD path moves the other way, from 1.34 on Oct. 30 to 1.31 by March 2027. OCBC presents the figures as an expected exchange-rate path, without assigning them to quarter-end dates.
The strategists said investors have already priced in substantial Bank of England tightening. In their view, further sterling gains would require stronger-than-expected UK economic data.
The Office for Budget Responsibility (OBR) forecasts UK growth of 1.2% in 2026 and 1.0% in 2027. Compared with its March outlook, the 2026 estimate is 0.1 percentage point higher and the 2027 estimate is 0.5 percentage point lower. The OBR puts the government’s margin under its fiscal stability rule at £15 billion for fiscal 2029-30 and estimates a 56% chance of meeting the rule. The target calls for a current-budget surplus in that year.
The OBR also projects debt-interest costs averaging £14 billion more annually over its forecast period than it expected in March. It attributes the increase to higher near-term Retail Prices Index inflation and higher expectations for Bank Rate and government bond yields later in the period. The OBR says higher energy prices also raise inflation and reduce real household income in the UK, a net energy importer.
Consumer prices rose 3.5% in the 12 months to September, up from the 3.1% annual rate recorded in August, the Office for National Statistics said. At its September meeting, the Bank of England held Bank Rate at 3.75%. Six policymakers voted to hold, while three favored a 0.25-percentage-point increase.
In separate reporting on Oct. 28, FXStreet said BNY senior EMEA market strategist Geoff Yu viewed clearer rate paths from the Bank of England, Federal Reserve and European Central Bank as important to overseas demand for UK assets.
The Bank of England is scheduled to announce its next rate decision and publish a Monetary Policy Report on Thursday, Nov. 5, at 7 a.m. ET (noon GMT).
