The pound is set for a recovery, and will have bounced back from the sharp losses it sustained immediately following the Brexit referendum by the time the UK leaves the EU, a new survey suggests.
According to a Reuters poll of foreign exchange experts, sterling is likely to gain over the next few months, however it is unlikely to reach the $1.43 height it traded at earlier this year.
The surge in the pound’s value came in the lead up to the May Bank of England (BoE) meeting, when it was expected to raise interest rates - instead, they were left in place.
Sterling is down about 10 percent since the country voted to leave the EU, trading at $1.34 yesterday.
However, according to the Reuters poll of over 50 forex experts, a lot of those losses will be wiped out with a likely rate hike later this year and a good Brexit deal with the EU.
In a month’s time, the pound is expected to drop down to $1.33, before recovering to $1.35 by the end of the year, and, by this time next year, will have reached $1.41.
“Although more recent GBP-specific ebbs and flows have been driven by the sharp re-pricing of Bank of England policy expectations, we expect the focus for the pound over summer to shift back to Brexit politics,” FX analysts at ING told Reuters.
Despite a slowdown in the UK GDP, a string of more positive results, including the latest survey of the services industry, have increased expectations that the BoE will raise interest to 0.75 percent in August.
Heavy snow in March dampened business activity across the board, particularly the construction and retail sectors, and the BoE will want to see more signs of stability before it raises rates.
BoE rate-setter Silvana Tenreyro said on Monday that while the weakness in the UK economy would be temporary, and she anticipated rates to go up in the near future, “the timing of those rate rises is an open question.”
However, uncertainty about a final Brexit deal is continuing to weigh on Sterling’s outlook, Reuters said, while volatility in Europe, particularly Italy, may also cloud the Pound’s future..
Forecasts for the next 12 months range from $1.23 to $1.54.