Brexit Panic Is Over – Sterling Pound Continues To Climb As The Dollar Weakens
The sterling pound is expected to have a major comeback this week as fears surrounding Brexit vote continues to fade.
According to the Bank of America, the pound will continue to climb by around 7% against the US Dollar in the coming months if the United Kingdom is able to get major deals after its exit from the EU.
The financial giant said that at current levels, the pound is cheap. It also added that fear surrounding Brexit vote is likely to fade after the triggering of Article 50 later this year.
The strategists working for the Bank of America have projected that the pound will hit a high of $1.40, which is an increase from its current level of around $1.247.
They said that the hard Brexit, as known by many people, is currently priced in and the pound is expected to be far higher if normal circumstances prevail.
Kamal Sharma and Athanasios Vamvakisis who work as strategists said, "The British pound looks cheap. We agree that there are many political barriers that lay ahead for the British pound in the coming months, but we are sure that the market will fall into a perpetual state of fear over every headline related to Brexit.
Sterling pound tumbled by around 20% against the dollar immediately after the results of European Union referendum was announced.
But in recent weeks, this currency has started to gain ground and last week it hit a 7-week high against the US dollar to exceed the normal $1.27 barrier.
One of the reasons which have facilitated the lifting of the pound includes the ever growing confidence in Britain's economy. Another reason which has helped lift the sterling pound is the Theresa May's Brexit strategy.
At the same time, one of the factors which have contributed to the decline of the dollar includes the growing fear of Trump’s presidency. Another factor is the protectionist policies championed by the recently inaugurated president.
The market analysts at City Index, Fiona Cincotta, said: "Before Trump’s inauguration as the US President, the dollar had an impressive record. However, the tables have turned against the currency in the past seven months. At the moment, it is not possible to associate Donald Trump’s administration for anything positive but surely movements in the greenback.”
She added, "The US dollar has been hitting low records over a concerted effort by the president and his administration to take it down.”
"Furthermore, last month’s unexpected volatility brought by the signing of the executive order banning Muslims from seven countries from entering the US ensured that concerns were raised regarding the further weakness of the Trump trade. Since then, geopolitical tensions continue to sour as Iran and other Middle East countries displayed their discontent to the ban. For instance, Iran has threatened missile action against the US allies and announced that they will stop doing oil business using the dollars.
“Whilst the earlier European Union referendum result and the October’s Theresa May's Brexit strategy led to the decline of the sterling pound, these developments have made the pound to remain relatively stable since then," She continued.