2 Reasons Why Pound Sterling (GBP) is Forecast to Improve - GDP and 'Brexit' News

May 24, 2016 - Written by John Cameron

STORY LINK 2 Reasons Why Pound Sterling (GBP) is Forecast to Improve - GDP and 'Brexit' News

Tomorrow morning could see the Pound repeat its positive movements, with optimistically-forecast UK GDP and potentially more 'Remain'-supporting news coming out.

Opinion Polls Forecast ‘Remain’ to Win EU Referendum

The Pound Sterling (currency : GBP) was heavily downsold during the days following the UK government’s February announcement that the European Union In / Out referendum would be taking place on 23rd June. The ensuing uncertainty sent the Pound Sterling euro exchange rate down into the 1.2300s - its lowest level for over 18 months - during the early part of April, as investors priced-in the live chance that Britain would be leaving the largest trading bloc in the world.

However, sentiment towards the Pound has sharply improved during the past week thanks to an IPSOS Mori opinion poll, published last Wednesday, which found that the ‘Remain’ campaign enjoyed a 55% - 37% lead. If next month’s referendum see the UK remain in the EU, then most analysts forecast that the GBP EUR exchange rate will track back into the middle part of the 1.3000 – 1.4000 band.

Markets Underestimate the Proximity of a Bank of England Interest Rate Hike

Money markets imply that the next Bank of England interest rate hike will not take place until the final days of the decade – December 2019 is the month which they currently suggest is the most likely for a hike. However, March’s UK Consumer Price Index inflation data revealed that the pace of British price rises stood at an above-expectations 0.5%.

However, most analysts believe that a move back above the 1% level for UK inflation would prompt the BoE’s monetary policy committee to begin tightening policy and several predict that at least one rate increase will come before the end of this year. If they’re correct, then Sterling will enjoy strong gains before the end of the year; such an outcome would see the Pound US Dollar exchange rate climb back into the 1.5000s, with 1.6000 a realistic target for this side of Christmas.

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts Pound Sterling Forecasts