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Sterling to float up

FOREX_Brexit_FXPIG

Sterling will make solid gains on the dollar in the coming year, a Reuters poll found, but that climb is based on the assumption that Britain leaves the European Union next year with a deal.

Median forecasts in the Aug.31-Sept 5 poll of 50 foreign exchange specialists put cable at $1.28 in a month, $1.32 in six and $1.37 in year - which would mark around a 6 percent rise from where it was trading on Wednesday.

But that still won’t be where it was before the June 2016 referendum and those forecasts were weaker than ones given just a month ago, highlighting market doubts as a deadline approaches for when the two sides want to have thrashed out a deal.

But the pound will instead fall 8 percent in the immediate aftermath if Britain leaves the EU without a deal in March 2019, the median forecast from an extra question suggested. The most pessimistic response was for a 15 percent slide.

A separate Reuters poll earlier this week gave only a one-in-four chance of a no-deal Brexit - despite there being less than two months before the UK and EU are hoping to agree on the terms of Britain’s departure with the two sides still looking a long way apart.

Soon after Brexit happens, the Bank of England is expected to raise its Bank Rate by 25 basis points to 1.0 percent, offering some support to the pound, but then hold off on any further moves until 2020.

The United States Federal Reserve has been steadily raising borrowing costs since late 2015, which alongside investors seeking safety in U.S. assets on concerns over the impact of trade tariffs, has lent support to the dollar.

So with those factors already priced in, any further dollar rise is expected to be limited.

Against the common currency, the pound will move little, which has been the case for a long while. In a month, one euro will get you 90.0 pence, in six months 89.0 pence and in a year 88.0 pence, not far from the 89.6p it was at on Wednesday.

The European Central Bank, which plans to end its 2.6 trillion-euro stimulus programme this year, is expected to raise its interest rates in the quarter after the BoE does.

Source:reuters.com

Sterling will make solid gains on the dollar in the coming year, a Reuters poll found, but that climb is based on the assumption that Britain leaves the European Union next year with a deal.

Median forecasts in the Aug.31-Sept 5 poll of 50 foreign exchange specialists put cable at $1.28 in a month, $1.32 in six and $1.37 in year - which would mark around a 6 percent rise from where it was trading on Wednesday.

But that still won’t be where it was before the June 2016 referendum and those forecasts were weaker than ones given just a month ago, highlighting market doubts as a deadline approaches for when the two sides want to have thrashed out a deal.

But the pound will instead fall 8 percent in the immediate aftermath if Britain leaves the EU without a deal in March 2019, the median forecast from an extra question suggested. The most pessimistic response was for a 15 percent slide.

A separate Reuters poll earlier this week gave only a one-in-four chance of a no-deal Brexit - despite there being less than two months before the UK and EU are hoping to agree on the terms of Britain’s departure with the two sides still looking a long way apart.

Soon after Brexit happens, the Bank of England is expected to raise its Bank Rate by 25 basis points to 1.0 percent, offering some support to the pound, but then hold off on any further moves until 2020.

The United States Federal Reserve has been steadily raising borrowing costs since late 2015, which alongside investors seeking safety in U.S. assets on concerns over the impact of trade tariffs, has lent support to the dollar.

So with those factors already priced in, any further dollar rise is expected to be limited.

Against the common currency, the pound will move little, which has been the case for a long while. In a month, one euro will get you 90.0 pence, in six months 89.0 pence and in a year 88.0 pence, not far from the 89.6p it was at on Wednesday.

The European Central Bank, which plans to end its 2.6 trillion-euro stimulus programme this year, is expected to raise its interest rates in the quarter after the BoE does.

Source:reuters.com

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