Analysts Concerned About The Sterling Pound More Than The Euro
The Sterling Pound’s performance look’s bleak following the release of analyst sentiments which revealed that they anticipate a sharp decline in the value of the currency.
Analysts believe that the GBP will drop to price levels previously seen in 2017, which means that they anticipate a far worse performance from the Sterling than from the Euro. The analyst expectation is based on the Brexit issue, which has weighed down heavily on the GBP and also on the Euro.
JPMorgan Chase & Co (NYSE: JPM) estimates that the GBP’s value will approach the 92 pence per Euro range before the end of 2019. That estimate is just 3% shy of the current levels which have not been experienced for more than two years.
Meanwhile, traders have been busy placing bets against the GBP and the last time this many bets against the currency happened was in April this year.
Britain’s next Prime Minister’s stance on the Brexit issue will influence the GBP’s performance
The GBP faces more risks especially with the British Prime Minister position up for grabs after Theresa May’s exit. The higher risk levels have resulted in a lower value for the GBP against the Euro. The currency is also under a lot of pressure as May’s Brexit deadline set for October rapidly counts down.
The issue of May’s successor is one that investors are not taking lightly. Boris Johnson is one of the candidates highly likely to take over the position, but this is not of much importance to the traders. The markets are eager to know the next Prime Minister’s stance on the Brexit issue. This is because the Prime Minister’s approach will determine the GBP’s future performance.
The Euro’s bearish performance highlights investor concerns about how the Bank of England intends to handle interest rates. The Bank of England is inclined towards increasing interest rates to maintain economic growth alongside the forecasts.
Markets are also reacting to the slowed trade around the world by adjusting their pricing in line with expectations of a rate cut in by the Bank of England possibly in 2020.
Timothy Graf, who is in charge of EMEA macro strategy for Europe at State Street Bank & Trust, pointed out that the Sterling Pound has a lot of downsides. He added that the Bank of England has been too optimistic at a time when almost all the central banks across the world except Norway have been gravitating towards easier policies.
GBP continues to take a hit and will likely continue on the same path
The GBP has so far dropped by roughly 4% since early April. Its value on Monday hovered at around 89.50 pence per Euro.
Euro-sterling risk reversals measured at six-month intervals are used to determine market positioning and sentiments. They have been shifting more and more in favor of the Euro since the start of May. This indicates that more investors have doubled down on their bets against the GBP.
Jeremy Stretch of the Canadian Imperial Bank of Commerce believes that traders are likely to continue taking short positions against the GBP compared to those of the Euro. Stretch believes that the GBP will reach 91.50 pence per Euro before the end of the year.