Pound forecast: Is sterling prime for a rebound?

Charles Purdy, director of Smart Currency Exchange, said the pound has fallen around 8 per cent from €1.17 to around €1.09 in 2017 amid acrimonious Brexit negotiations and signs of an economic slowdown, but the negatives have been overdone: “The UK economy is holding up, unemployment is at record lows and Britain is still home to world-beating industries.” 

Purdy said writing off the pound would be irresponsible: “There is every chance it could stage a recovery before the year is out.” 

Pressure may increase on the Bank of England to support the pound by raising interest rates from today’s 0.25 per cent. 

Last week, the British Chambers of Commerce said sterling’s slide has done more harm than good, as pricier imports drive up inflation and hit consumer spending, while UK exporters have failed to take advantage. 

Michael Saunders, a member of the Bank’s monetary policy committee (MPC), has called for action, but few expect a hike when rate setters meet on Thursday. 

Lee McDarby, managing director for corporate foreign exchange and international payments at Moneycorp, said: “If MPC members start talking about hiking rates then the pound may recover, provided it is backed by action.” 

He said the euro has been rising strongly against all global currencies, not just the pound: “The European economy has performed well and political uncertainty faded after the French presidential election.” 

Sterling has already fought back against the US dollar to trade at more than $1.31, up almost 7 per cent from $1.23 at the start of the year. 

Fawad Razaqzada, technical analyst at Forex.com, said the greenback has suffered a “spectacular slump”. 

“It has been hit by poor economic data, fears over the economic impact of the hurricane season, and reduced expectations of another interest rate hike from the Federal Reserve.”