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The
pound's rise to around $1.30 after Prime Minister Theresa May in
April called a general election has reduced its undervaluation
and the scale of market bets on further weakness, currency
analysts at the U.S. investment bank said in their mid-year
outlook.
"The bull case (for sterling) has become less convincing, with
the economy now showing signs of weakness. For sterling to do
better, we need to see Brexit negotiations turning constructive,
allowing markets to assume the British economy avoiding a
cliff-edge Brexit," they said in the report published late on
Sunday.
They now expect the pound's peak next year to be $1.26 in the
first quarter, slipping to $1.23 by the end of the year. In
March, when sterling was in the low $1.20s, they predicted that
sterling would rise as high as $1.45 by the end of 2018.
They also turned much more bullish on the euro, ditching their
call for a break below parity with the dollar later this year
and now predicting a rise as high as $1.19 early next year <EUR=>.
The euro was last trading at $1.1245, while sterling was last at
$1.2900.
(Reporting by Jamie McGeever; Editing by John Geddie)
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