Investment banks upgrading Sterling forecasts
The Pounds surprising start to the year, has caused many investment banks to change their forecasts both short and long term. ING in particular have caused a stir this morning with a mouth-watering upgrade to Sterling's fortunes in 2021. £-€1.16 is the target rate for June and £-€1.1750 by year end with £-$ forecast at 1.45 & 1.50 on the same dates. ING are of the opinion that 'the £ has been suffering persistent Brexit-related undervaluation since 2016 and the currency should now start the process of a gradual convergence towards a fair value'.
Not everyone agrees though and banks like HSBC & BoA still believe the Pound is in for a tough 2021. The former believes the average rates for Sterling in 2021 would be £-€1.07 & £-$1.34. Personally, i'm hoping to see trading over £-€1.15 & £-$1.40 by the summer, that's if there are no major surprises this year..
There are of course many concerns still to come this year for the UK, including the new relationship with the EU, unemployment and a potential Scottish referendum. On the latter and today the Centre for Economic Performance published research that suggests the income of Scots would likely fall sharply in the years following a split from the rest of the UK. The data shows that Scotland's trade with the rest of the UK is around four times larger than its EU trade. Changes in trade costs due to independence would be two to three times more costly to the Scottish economy than the impact of Brexit and Scots income per capita would reduce by 6.5-8.7%.
Euro-Zone data this morning was overall as expected, but the inflation number was much higher than forecast which has helped the Euro & the ECB. Italy produced better than expected services data which shows the downturn has eased somewhat compared to December's horrible figure. However, poor weather conditions in Spain weighed on its services number today which fell well below estimates.