Bank of America is bullish on the pound exchange rate, predicting that the GBP/USD will rise to 1.35 by the end of the year!
Last week, the pound rose against all major currencies, ending its previous decline. Bank of America Global Research suggests that GBP/USD, EUR, JPY, and CHF may continue to rise in the future.
The data released last week showed that the UK economy continued to grow strongly in the second quarter, and the labor market conditions have been good in recent months, which has encouraged the rebound of the pound from its low point in early August.
At the same time, retail sales in the UK remain strong, despite the Bank of England's restrictive monetary policy continuing to suppress economic growth and inflation, which resulted in lower than expected July data released by economists on Wednesday.
However, Bank of America's global research strategist stated that there is still room for further appreciation of the pound, and by the end of the year, the pound should reach 1.35 against the US dollar and 1.20 against the euro (i.e. the euro should fall to 0.8333 against the pound).
They added in Thursday's briefing, "The pound remains the best performing G10 currency so far this year. Fundamental/long-term positive factors remain unchanged, and we are confident that recent weakness is not a reflection of the UK's outlook. Other things being equal, the reasons for the pound to rise against the euro, yen, and Swiss franc are still convincing, but this makes the pound vulnerable to any recent volatility shocks
Perhaps more noteworthy is that the pound is expected to rise to 213.60 against the yen, which will be the highest level since the eve of the global financial crisis in 2008.
Daily chart of GBP/USD
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