The pound’s recovery may be getting ahead of itself.
That’s according to the median estimate of economists in a Bloomberg survey, who see sterling dropping about 4 per cent to $1.21 by the second quarter of 2017. The pound, which has been buffeted by Britain’s vote to leave the European Union, is currently exceeding forecasters’ estimates for that period by close to the most in three months.
Sterling climbed 2.2 per cent against the dollar in November, posting its first monthly gain since April. Still, it has slumped 15 per cent since the UK referendum in June, making the pound the Group-of-10’s worst-performing currency this year.
Richard Benson, London-based managing director and co-head of portfolio investment at Millennium Global Investments, sees the triggering of the UK’s exit from the EU by March, a strong dollar and weaker UK data helping to push sterling lower in 2017.
Article 50
“It seems reasonable that the pound would head lower as part of a broad dollar appreciation,” he said. “The moment article 50 is triggered, the clock is counting down. Having recovered like we have done, most outcomes are somewhat negative from here.”
Day By Day is the most bearish forecaster, predicting sterling will fall to $1.03 by the second quarter. Bayerische Landesbank, which was among the top 10 most-accurate forecasters in the third quarter, according to Bloomberg rankings, is next, with $1.12.
The pound rose 0.2 per cent to $1.2652 as of 7.18am in London, having touched $1.2775 on Tuesday, the highest since October 4th.
Prime minister Theresa May won lawmakers’ backing to trigger the start of Britain’s exit from the EU by the end of March on Wednesday. – (Bloomberg)
