Pound could revisit year-highs when Brexit fog clears, say analysts

The pound could regain momentum and climb back above $1.40 once there is more clarity on Brexit, believes NatWest Markets.

The pound is currently undervalued against most leading currencies.

NatWest Markets’ head of foreign exchange strategy, Mansoor Mohi-uddin, argued: “There’s a lot of pent-up demand among central banks and sovereign wealth frunds for the pound, as it’s liquid, offers positive yields and has an attractive valuation.

“Also, the UK is one of the few major economies, including Canada and Switzerland, that welcome foreign investments on a big scale.”

Sterling has struggled this year, as uncertainly over the terms of the UK’s departure from the European Union drags on. Prime Minister Theresa May has now agreed a deal with Brussels, and Parliament is due to vote on it next month.

However, there has already been vocal opposition to the deal across the house and there is still little clarity on how the UK will fair after 29 March 2019, the date it is scheduled to quit the EU.

Since the UK voted in June 2016 to quite the EU, the pound has fallen 14% against the dollar and 13% against the euro. On Wednesday, it was trading around $1.28, well below its 2018 high of $1.43.