Foreign currency experts at Bank of America (BoA) have upgraded their Pound Sterling forecasts. Analysts note;
“GBP is expected to outperform most the G10 complex except for AUD, NOK, SEK. Based on our projections, GBP should end the year with as one of the strongest G10 currencies with GBP/USD gravitating towards our measure of fair value and under our broader views on USD weakness.”
The Pound to Euro (GBP/EUR) exchange rate is forecast to strengthen to 1.19 at the end of this year with the Pound to Dollar (GBP/USD) exchange rate forecast to advance to 1.37.
GBP/USD is also forecast to trade just above 1.40 at the end of next year.
The dollar has been generally strong over the past few years with the narrative of US exceptionalism a key element in global markets.
The evidence of US outperforming other major global economies has boosted the dollar.
BoA considers that there are valid comparisons between the US and UK; “What has been relevant for the US can equally be applied to the UK with both economies suffering from elevated services inflation and tight labour markets. Though US growth has been stronger for longer versus the UK, the nuance here is that expectations around UK macro have been very low.”
According to the bank, the UK is in a good position to outperform continental Europe which will support the UK currency.
It adds; “With the domestic economy continuing to improve, the pessimistic read on UK growth is harder to reconcile.”
The bank also expects the US dollar to lose ground this year, which will benefit the Pound.
BoA is bearish on the Swiss franc. According to the bank; “A structurally weaker CHF has been a high conviction call for BofA since the start of the year, and while we had already factored this into our profile, we make further tweaks and expect a slightly faster pace of depreciation.
GBP/CHF is forecast to strengthen to 1.18 at the end of next year from 1.11 at present.
