Sterling's Profit from 'Remain' Looks Limited, £1.40 Seen by Year End
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"Sterling rose some 6%, or 8 big figures, against the US dollar since last Thursday and in my view its upside potential is largely exhausted even with Britons voting 'Remain'," Ladislav Benedek, senior currency trader from Intesa SanPaolo in Bratislava, told WBP Online during a brief telephone interview on Thursday.
Sterling has been under immense pressure since the beginning of 2016, with traders heavily discounting the risk of the UK eventually voting in favor of leaving the EU. Sterling's fall has been also noted by the Bank of England as one of the inflation stirring factors, should a depreciating trend prevail.
Currency traders and analysts agree that with the UK voting in favor of the status quo, the question of the long-term interest rate outlook will return to the epicenter of market attention. Also the outlook for the growing interest rate differential between the US and the UK will determine the forex market again.
"Even if the exchange rate did climb a little more in the event of a vote to remain, we suspect that it would come back down again – and fall further – before too long, given the implications for monetary policy," Alex Holmes from Capital Economics predicted in a note on Thursday.
The end of the year prediction of sterling against the US dollar stands at £1.4000 from capital Economics.