“The recent rise in sterling is of course partly due to broader dollar weakness, but since early November the pound has also risen on a trade-weighted basis because it tends to perform particularly well in an environment of moderate interest rate volatility,” Trivedi said. And recovery.” Stock prices.
“This has been the backdrop since early November and we expect more of this next year. That is why we believe GBP is one of the currencies that has more room to rise as markets adopt a ‘soft bear’ view.”
Concerns about the British economy increased after official figures showed last week that Britain is on the verge of recession.
The economy contracted by 0.1% between July and September, meaning another quarter of economic decline in the last three months of 2023 will mark the first technical recession since the first lockdown.
However, Trivedi said the next general election was likely to provide a boost to growth: “It is fair to say that the upcoming election has the potential to stimulate additional fiscal support and reduce trade frictions to some extent with the EU, both of which are essential.” It should help support domestic growth, help avoid recession risks and strengthen sterling.
Jukes added: “You can say: Well, we don’t have a lot of growth, we have big political problems, we have a lot of room to cut interest rates. And my answer is: Well, everyone knows that.”
“Then I get asked: Are you worried about the election? Well, what worse could happen to sterling politically than what has already happened over the past 18 months?