BofAML forecasts relatively stronger pound against Euro

Bank of America Merrill Lynch (BofAML) stranded out of a regular group of analysts who has been downgrading their forecast for the British sterling against the single currency. Instead, the investment bank is forecasting a strong sterling against the euro, though according to them it is likely to go down against the dollar. The pound has declined about 25 percent against the Euro since 2015; more so after the UK referendum, however, analysts at BofAML believe it is likely to trade stronger from here. The euro bottomed around 0.69 area in July last year and revisited the area in November and started rising against the pound since then. It reached 0.87 area a few weeks ago, which is the highest level for the currency since August 2013. The single currency is currently trading at 0.852 against the pound.

BofAML expects the pound to drop by another 5 percent to 1.25 against the dollar but expects to hold firm against the single currency. It says that the yield spread between European securities and Gilts were the main reason behind the move, which declined from 1.37 percent to just 0.6 percent in August. The investment bank points out that the decline has stabilized and the spread has bounced back by 15 basis points from the bottom.

We, At FxWirePro, has forecasted parity for GBP/USD, however, we also feel that Euro is also likely to slide against the dollar and that could keep EUR/GBP in check.