Deutsche Bank’s ‘cautious optimist’ sterling comment
While the pound stands out as the best performing G-10 currency in 2023, some strategists believe that the currency’s rally may continue in the medium term.
Sterling, which reached a 10-month high on Wednesday with better-than-expected data and the weakening dollar, has gained more than 3 percent against the dollar since the beginning of the year.
The British economy has so far avoided recession and posted stronger-than-expected growth in January.
The country’s financial situation has greatly improved with the fall in gas prices. Financial support provided by the government increased the positivity. On the other hand, the picture is not entirely optimistic. While the UK continues to be the only G-7 economy that could not reach the pre-Kovid production level, inflation is in double digits.
“Most of the good news in the UK is probably priced in,” Deutsche Bank Currency Strategist Shreyas Gopal said in a note Wednesday.
“The market has moved closer to our view that the UK’s growth prospects could be raised this year in line with other major economies, but our overall view is still more optimistic than market expectations. “The good domestic news may have been priced in, but given external factors, our forecasts are still up,” he said.
Deutsche Bank advises investors to hold on to the sterling long against both the US dollar and the Swedish krona.