Goldman Sachs Backs The British Pound

Goldman Sachs Backs The British Pound

over 4 years ago2 mins

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Only three months ago, the value of the British pound was at its lowest consistent level relative to other currencies since 1985. But Goldman Sachs now thinks that the pound is bound for sunlit uplands… 🌄

What does this mean?

The investment bank on Thursday flagged its favorite 2020 bets – chief among them pounds sterling. The UK’s currency has already gained 3.3% against the value of the euro and 5% against the US dollar since the start of October, but Goldman believes Britain’s general election next month could spark a further rally.

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While recent votes in the UK have proved notoriously unpredictable – not least the 2016 referendum on membership of the European Union – economists at big banks including Morgan Stanley and Bank of America Merrill Lynch appear confident that the UK’s governing Conservative Party will emerge triumphant on December 12th 🧐

That could finally create some much-needed certainty about the Brexit process, as well as unleashing greater government spending – both of which should be good for the British economy. And Goldman thinks that stronger demand from international investors buying the country’s currency in order to invest in UK companies could lead to its value jumping another 4% in the first quarter of 2020.

Why should I care?

Before you rush out to buy the pound, it’s worth noting that Goldman recommends investing via the "options" market. After all, Brexit uncertainty may well persist for some time yet: even with an exit deal agreed, there’s the small matter of the UK’s future trade relationship with the EU to sort out… 😩

Besides, not every bank is sold on the pound. Britain’s own HSBC agrees that a conclusive election result could send the value of £1 up to $1.45 next year – but it also warns that a lack of resolution could see that fall to just $1.10.

The pound remains well down against the dollar over the past five years
The pound remains well down against the dollar over the past five years

If you’re interested in finding out more about the factors influencing currency movements, check out our Currency Trading Pack! 😉

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