The British book is widely planned to continue to increase compared to the US dollar.
Matt Cardy | Getty images
LONDON – THE British book Rallied to his highest level in almost four years on Thursday, even if analysts remain divided on the potential of the increase.
Sterling has been seen for the last time a merchant more than 0.5% more compared to the US dollar, reaching $ 1,3736 – his highest level since October 2021.
So far this year, the book has increased by almost 10% more than the greenback, according to LSEG data.
GBP / USD price
Against the euroHowever, Sterling is down 2.9% for the start of the year. It was noted for the last time exchanging 0.2% more compared to the euro zone currency, with a book buying around 1.173 euros.
Weakness
According to Janet Mui, responsible for market analysis at RBC Brewin Dolphin, a large part of the ascending trajectory of the pound is in fact more to do with the weakness of the underlying dollar than faith in sterling itself.
“The relative force of the book was weaker US dollar History this year, “she said CNBC by e-mail on Wednesday.
The unpredictable trade policies of US President Donald Trump has shaken confidence in American assets earlier this year, which aroused concerns in the markets concerning denollarization.
Paul Jackson, global manager of research on the allocation of assets in Investo, said that Sterling was being recovered from the “extreme lowest” seen in the aftermath of the so-called budget of the so-called mini-dubbing of the former British Prime Minister Liz Truss, who sparked a severe sale of the book and the British government’s obligations in 2022.
However, he agreed that a large part of the movement this year was attributable to the weakness of the dollar, stressing the simultaneous depreciation of Sterling against the Euro.
Will Sterling go above?
“I would expect this model to continue in the future, the dollar weakening with the American economy (and the doubts of investors concerning American tax and price policies), while the euro could strengthen optimism as to the implications of the next budgetary increase (in particular in Germany),” said Jackson of Innesco.
He argued that the ECB had probably completed most of its monetary easing for the current cycle, while the Bank of England and the Federal Reserve “have a lot of catch -up to be done”.
“In 12 months, I would expect GBPUSD to be around 1.40 and GBPERT is around 1.15 (currently 1.17),” added Jackson.
Jackson forecasts represent a bonus of around 2.9% compared to current exchange rates compared to the dollar.
The MUI of RBC Brewin Dolphin suggested that in the coming months, the prospects of the British book are not too convincing – but have noted that geopolitical developments could further catalyze the ascending movements in the longer term.
“In the short term, the increase in the pounds can be limited due to the soft British economic momentum and more scope for the Bank of England to reduce rates,” she said.
“For the future, a potential catalyst for the book could be an improvement in the EU relationships, in particular if it results in a more concrete action over time.”
Brian Mangwiro, an investment manager of the Multi Asset group at Barings, adopted a more pessimistic view.
“We are lowered from GBP in the medium term. We plan the EURGBP at 0.875 and GBPUSD at 1.30 in [six months]”He told CNBC by e-mail on Wednesday.
He argued that the macroeconomic backdrop does not justify the performance of Sterling against the greenback this year, attributing it rather to the reflection of a Sale of the post-liberation day of the US dollar.
Dollar index year to date.
“The markets had been too downgraded to the United Kingdom after the Budget of Chancellor Reeves,” he added. “Consequently, the surprises of positive data have become favorable to the GBP. However, we continue to expect the economic growth and inflation of the United Kingdom to slow down; the signs are already displayed, that the Banque d’Engleterre also recognizes. This supports BOE rate reductions and finally weighs on the book.”
Mangwiro also noted that, in his opinion, the risks of denollarization seemed “too blown”.
“The feeling will probably reverse as American growth rebounds and the benefits of companies remain resistant,” he said. “With an extremely short current USD positioning, this should support a USD rebound, sliding the cable below.”
Jackie Bowie, director and head of Chatham Financial Emea, described the British book as “a currency that finds it difficult to regain its old glory” despite a “disproportionate role” in the world exchange markets. The prospects of the Sterling book are mixed, in its opinion.
“Looking at the main fundamental principles of the United Kingdom, we can see certain reasons to be optimistic about GBP’s prospects, but there are also challenges,” she said by e-mail, providing for “moderate” economic growth supported by public spending.
“The relative monetary policy should keep the GBP attractive, but the geopolitical environment will play a key role in determining whether this benefits the GBP, in particular compared to the EUR (which benefited from the outings of the US dollar due to the achievement of Trump’s chaotic policy and the apparent authoritarian approach to the government),” she said.
