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- Sterling to remain soft for now – ANZ
Sterling to remain soft for now – ANZ
FXStreet reports that the UK-EU free trade agreement (FTA) is welcome, but does not provide a compelling reason to buy GBP now. Thus, economists at ANZ Bank anticipate some underperformance.
“Against the dollar, sterling is still 10% below its pre-2016 referendum level. Using OECD producer prices, it is estimated to be 8.5% undervalued vs USD. We think, given the immediate challenges facing the economy, a discount to fair value is justified.”
“Until greater economic certainty emerges, which it will do in time, sterling may underperform. We forecast that it will rise against the USD as part of a broad-based dollar sell-off, but anticipate that it can underperform on the crosses. The relatively favourable cyclical position of the Australasian economies, their better fiscal outlook, deepening APAC regional trade arrangements and diminished requirements for additional monetary easing across the region argues in favour of regional FX outperformance versus GBP.”
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