Economists predict that the British pound will reach $1.35 next year, providing a favourable exchange rate for those converting currencies for holidays.
The expectation of Sterling’s appreciation is based on the anticipation that both the US Federal Reserve and the European Central Bank will start decreasing their interest rates early in the coming year.
In contrast, the Bank of England is projected to lower its rates, which are currently at a 15-year peak, much later.
The Bank’s Deputy Governor, Sarah Breeden, in a recent speech, suggested that the UK’s interest rates would stay elevated for a more extended period. She emphasized the necessity of maintaining a restrictive monetary policy to reduce inflation to the Bank’s target of 2 percent. Currently, inflation is at 4.6 percent.
Goldman Sachs, an investment bank, forecasts that the pound will rise to $1.35 in a year, marking a significant recovery from its record low of $1.0327, which occurred just over a year ago following the mini-Budget.
Today, Sterling has increased by 0.7 percent, reaching $1.27.
The upcoming release of Britain’s latest inflation data on Wednesday is eagerly awaited by traders. This data will provide insights into the effectiveness of the Bank of England’s stringent monetary policy in slowing down inflation.
