If the flight away coming from the dollar continues, investors are likely to keep turning to the pound, said Simon Derrick, chief currency strategist at BNY Mellon.
He noted in which investors appeared to be ignoring domestic political factors in addition to potential Brexit problems — in addition to in which This specific wasn’t necessarily wrong, because “different factors drive the FX market at different times.”
“All in which can reasonably be said is usually in which politics isn’t an issue right currently in addition to in which even a modest yield — or the promise of one — is usually sufficient to attract inflows coming from the dollar,” Derrick told CNBC on Friday. “Any signals coming from the BoE could therefore be GBP positive.”
Numerous analysts are predicting further strengthening through 2018. BMO Capital Markets recently revised its 12-month forecast for GBP-USD up to $1.52, in addition to Berenberg forecast $1.45 by the end of This specific year. While a stronger currency is usually harmful for export competitiveness, for the U.K. This specific development appears welcome.
“Unlike various other central banks, the BoE should be welcoming a stronger currency as the item aides their efforts to return inflation back towards target,” Hardman said.
Many observers have long been calling for a rate rise to help bring inflation closer to the government’s target rate of 2 percent. The U.K. in November suffered its highest inflation in half a decade at 3.1 percent, coming down ever slightly to 3 percent for December, hinting in which the squeeze on British living standards may gradually begin easing.
In December, the IMF delivered a grim report card on Britain’s economy, blaming Brexit for the country’s slow growth in comparison to a broadly based global upswing. GDP growth for 2017 was 1.8 percent, the lowest in a few years.