Market analysts anticipate a significant rise in the pound’s value against the dollar, reaching its highest in two years, as the Bank of England gradually gradually reduces interest rates compared to other central banks.
Goldman Sachs, a major player on Wall Street, forecasts that the pound will climb to $1.30 and 84p against the euro in the upcoming months. This prediction comes as the US Federal Reserve and the European Central Bank are set to commence interest rate reductions.
Currently, the pound has slightly decreased by 0.1% against the dollar, valued at $1.26, but has gained 0.1% against the euro, standing at 85p.
Isabella Rosenberg, a strategist, noted that the pound has significantly gained from the worldwide trend of disinflation and the move towards policy relaxation.
In contrast, PGIM Fixed Income has cautioned that potential tax reductions in the forthcoming Budget, especially with a general election on the horizon, might compel the Bank of England to maintain higher interest rates.
A global investment strategist, Guillermo Felices commented, “The pound still has potential. A combination of tight monetary policy and relaxed fiscal policy is generally favourable for currencies, and this is currently being observed in the UK.”
The Bank of England is expected to keep interest rates at a 16-year peak of 5.25% in its next decision, with financial markets predicting a total reduction of one percentage point through four quarter-point cuts this year, bringing rates down to 4.25%.
Meanwhile, the Federal Reserve will likely implement five similar rate cuts, and the European Central Bank is anticipated to execute six cuts by year-end.
