6 October 2022 | Other

There’s a 50-50 chance of pound reaching parity with dollar

According to a poll conducted by Reuters, the pound sterling is expected to strengthen over the following year, with a projected volume of growth being about by 3.6%. Still, there was no consensus among the analysts on whether there would be a parity reached between the pound sterling and the U.S. dollar towards the year’s end.

As it was noted by analysts from Wells Fargo, a considerable weakening of the pound is suggested to continue in the future. They have also expressed an opinion that the Bank of England would deliver rate hikes in smaller volumes than the Federal Reserve System of the U.S. taking into account the country’s ongoing sliding into a recession and lower figures of the forecasted CPI inflation peak than it was expected before.

It’s suggested that the Bank of England, which has been delivering rate hikes recently, is planning to increase borrowing costs by 75 basis points during the upcoming meeting. The meeting is scheduled on November 3. Nevertheless, the Bank of England didn’t manage to reach the volumes of hikes of the U.S. Fed, which is aggressive in its approach to rate hiking and isn’t going to slow down.

Experts at Goldman Sachs stated that it’s still uncertain if the Bank of England would have the power or will to show a firm reaction to policy rates to strengthen the pound in the nearest future.

All in all, the probability of the pound reaching parity with the dollar by the end of the current year was estimated to be low by 18 respondents, with another one respondent having called it very low. Although other 17 respondents suggested such a probability to be high, and one called it actually very high.

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