The pound could hit a peak of $1.40 by March next year, bolstered by a more promising economic outlook and the prospects of political stability, predicts the CEO of deVere Group.
The optimistic prediction from Nigel Green comes as major financial institutions rush into the UK’s currency, which is currently around $1.29.
Mr Green said: “The recent landslide win appears to have reignited confidence in the UK’s economic future, encouraging investors and driving positive sentiment across the markets.
“Labour’s decisive victory has created a stable political environment, essential for promoting economic growth and attracting investment.”
He added that the new Government is seen as “poised to implement policies” that promote fiscal responsibility and economic development.
Mr Green noted that this newfound political stability presents “a stark contrast” to the turbulence in the United States, where the upcoming presidential election is creating uncertainty, and in France, which is grappling with ongoing political crises affecting the euro.
According to the CEO, one of the key factors supporting the pound’s “bullish trajectory” is the Bank of England’s monetary policy.
He explained: “Unlike other central banks that are aggressively cutting interest rates, the Bank of England is expected to take a more measured approach.”
The anticipation that the Bank of England will cut interest rates less sharply than its counterparts has already had a positive impact on sterling, which Mr Green said is “setting it on course for its best month since November.”
He continued: “Since the start of the year, the pound has appreciated nearly 1.5 percent, outperforming all Group-of-10 peers against the dollar.
“We are optimistic that this trend will continue and believe that should the momentum continue, the pound could reach a peak of $1.40 by March next year.”
Against the euro, the pound is currently trading at its highest level since August 2022.
Mr Green said: “The confluence of a few different factors – Labour’s landslide, the Bank of England’s caution of cutting rates, and political uncertainty elsewhere, among others – is driving positive sentiment on the pound.
“A growing number of investors are likely to pile in, further pushing the currency’s value in the near term.”
French finance giant Amundi has also forecast a surge in the pound’s value over the year as Britain’s economy continues to stabilise.
As per Amundi’s predictions, sterling could rise up to $1.35 by the end of 2024. Andreas Koenig, Amundi’s head of global FX told the Telegraph: “You have an improvement in the economic environment, and you have a relatively stable Government, so you have a lot of arguments in favour of sterling.
“It might be less risky and it might be a diversifying alternative in the portfolio, which is supportive.”