Pound’s Winning Run Extends to Third Week as Outlook Brightensby
Sterling advances to highest in a month versus dollar
U.K. data ‘better than expected’: UniCredit’s Mialich
The pound is enjoying its longest run of gains since before Britain voted to leave the European Union as data signal the economic consequences of the decision may be less dire than some analysts feared.
Sterling climbed to its highest level in a month versus the dollar, extending its advance into a third week. A report showing a gauge of U.K. construction rebounded last month more than economists forecast added to the sense of optimism, with the currency approaching the strongest level in four weeks against the euro. The pound jumped versus all its 31 major counterparts this week, bolstered by data that showed improvements in manufacturing output and household confidence.
“With the latest series of data releases, we cannot ignore that they all came better than expected,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. “We expect that the deterioration in the U.K. economy that hasn’t been visible so far will be more evident in the coming months” and gains now present a “selling opportunity rather than the basis for a trend reversal,” he said.
The pound rose 0.2 percent to $1.3299 as of 4:32 p.m. London time, after touching $1.3352, the highest since Aug. 3. It gained 1.2 percent this week, in the longest winning run since April 29. Sterling appreciated 0.6 percent to 83.88 pence per euro, having earlier reached 83.76 pence, the strongest level since Aug. 4.
Indications that the U.K.’s economic prospects outside the EU may not be as bleak as some analysts forecast are providing some support to the pound, which is still the worst-performing major currency since June 23, the day Britain voted to exit the world’s biggest trading bloc. The currency extended its gains versus the dollar Friday as a report showed U.S. payrolls grew in August less than economists predicted.
With terms of the exit still to be negotiated, the risk for pound bulls is that the current optimism turns out to be short-lived. Sterling is still down more than 10 percent versus the dollar since the day of the EU referendum.
UniCredit’s Mialich forecasts the pound will depreciate to $1.20 by year-end, a level not seen since 1985.