Predicted Sterling surge to boost Irish exporters
FOREIGN-exchange strategists are predicting the pound will surge to the highest level against the euro in more than seven years, which would be a boon for Irish exporters.
Markets have brought interest-rate rises back into sight, helping the pound recover all of its losses in the two months before the UK general election.
"The election is gone now, it allows us to get back to watching the economic data," said Steven Saywell, global head of foreign-exchange strategy at BNP Paribas in London.
"We put out a trade recommendation to start building sterling exposure. We like it best against the low-yielding European currencies - the euro or the Swedish krona."
Britain's currency fell 0.5pc this week against the dollar to $1.5647, though that follows a 3.8pc jump over the previous two weeks, its best back-to-back gain in six years.
On a trade-weighted basis, the pound appreciated to the strongest level since August 2008 on Thursday. Sterling had been weighed down by concern the election would result in no clear winner. The pound will rise to 68p per euro by the end of the year, Mr Saywell predicted. He said traders are underestimating policy tightening from the Bank of England, which BNP Paribas expects to start next February. Markets aren't pricing in the first rate increase until next July.
Morgan Stanley analysts said Britain's currency is in a "strong position" and recommends a long position, or a bet it will strengthen, against the euro.
UBS Group, the world's biggest wealth manager, is selling Australia's dollar versus the pound for its clients. Steve Barrow, head of Group-of-10 strategy at Standard Bank, sees the pound appreciating past 70p per euro - and staying there.
"The election lifted the pound because the result was totally unexpected," Mr Barrow said. The "disarray among opposition parties" may continue to support the currency longer term, he said, by helping the Conservative Party "go on to reap more electoral benefits in the future". (Bloomberg)