Biggest Pound Bull Holds Nerve After Week of Market Turmoil

  • Swissquote Bank sticking with year-end forecast of $1.62
  • Pound posts weekly drop versus dollar amid global volatility

Swissquote Bank SA, which has the most optimistic outlook for the pound against the dollar, has no plans to adjust its bullish forecast, despite a week of surging volatility in global financial markets.

Swissquote predicts that sterling will rise to $1.62 in the fourth quarter of 2015, the highest of all the 58 forecasters surveyed by Bloomberg, and a level not seen in almost a year. The median estimate of the analysts is $1.54. The pound reached its lowest level in seven weeks on Aug. 28.

“Obviously we have taken a hit in the last few days in terms of our forecast, but we do believe that some of the sheen will come off the U.S. and it’s starting to push off the dollar,” said Peter Rosenstreich, chief market strategist at Swissquote in Gland, Switzerland. “The data should continue to improve in the U.K., so we’re going to hold onto this for a little while and see where it takes us.”

The pound fell 2.1 percent this week to $1.5359 as of 5:03 p.m. London time on Friday. It touched $1.5336 the same day, the lowest since July 8. The last time sterling was at $1.62 was in October 2014.

Britain’s currency depreciated for a fourth week versus the euro, sliding 0.2 percent to 72.71 pence. It touched 74.23 pence on Aug. 24, its weakest level since May 7, the day of the U.K. general election.

GDP Data

A report Friday showed the U.K. economy grew 0.7 percent in the second quarter, in line with the previous reading and compared with growth of 0.4 percent in the period ended March. U.S. data a day earlier showed annualized growth of 3.7 percent, up from the 2.3 percent the Commerce Department reported last month.

Data due next week will show a gauge of services output rose to 57.7 this month from 57.4 in July, according to the median forecast in a Bloomberg survey of economists before the report is released on Sept. 3. A reading above 50 indicates expansion.

U.K. government bonds fell this week, with the yield on the 2 percent gilt maturing in September 2025 climbing 14 basis points, or 0.14 percentage point, to 1.96 percent.

The Debt Management Office is scheduled to auction 3.75 billion pounds of gilts due in January 2021 on Sept. 2.

Financial markets in the U.K. will be closed on Aug. 31 for a national holiday.

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