Kit Juckes, chief currency strategist at Société Générale, reports that large interest rate support is needed to hold sterling.
Monetary policy expectations remain the main short-term driver of currency trends
Monetary policy expectations remain the main short-term driver of currency trends. There is a deep well of negative sentiment around the UK and the Pound, which has been in place since the financial crisis and even more so since the Brexit referendum. But long-term growth concerns cannot drive the British pound lower and lower in real terms, they simply ensure that it remains lower than it was before.
The rate differential needed for the British pound to break above the $1.30 level today is much larger than it was a few years ago. This won’t stop GBP from being resilient for now as long as monetary policy tightening remains on the table, but once rates have peaked, in the US, UK, Eurozone and elsewhere, the GBP will look quite vulnerable.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
