The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
The pound could revisit this year’s high above $1.43 if Brexit uncertainty is removed, as long-term foreign investors are waiting in the wings to scoop up UK assets for their attractive valuation, according to NatWest Markets.
Sterling is undervalued against most Group-of-10 currencies in terms of OECD purchasing power parity. It has fallen 14 percent against the dollar, 13 percent versus the euro and 8 percent to the Japanese yen since Britain voted to leave the EU in 2016.
“There’s a lot of pent-up demand among central banks and sovereign wealth funds for the pound as it’s liquid, offers positive yields and has an attractive valuation,†said Mansoor Mohi-uddin, head of foreign-exchange strategy at NatWest.
Yet, any clarity on Brexit remains elusive at this point. While UK Prime Minister Theresa May has secured a divorce agreement from the EU, it sparked lawmaker protests and ministerial resignations. A rejection of the deal by Parliament could reignite risks that include a no-deal Brexit, an early election, or even a second referendum.
The pound advanced against all its G-10 peers on Wednesday as the market awaits an analysis by the Bank of England on the various possible scenarios of Britain’s exit from the EU.