Debate continues as some analysts predict $1.20-$1.30 could hold for sterling this year
Investors should prepare for the British pound to hit parity with the U.S. dollar by the end of the year or early in 2017, said at least one analyst — and should parity happen, it’ll be a first.
After last week’s surprise U.K. vote to exit the European Union trading bloc, sterling fell more than 12% against the dollar on Friday before trimming some of its unprecedented drop late in the U.S. trading day. But bears regained the upper hand on Monday, sending the currency to a fresh 30-year low at $1.3121.
The details of Britain’s exit are murky, at best. Prime Minister David Cameron said he would leave the task of triggering Article 50 of the Lisbon Treaty — the untested clause that governs how countries could exit the bloc — to his successor. That raises questions of timing.
The article allows a country a maximum of two years to work out the details of an exit. But many say it could take the U.K. longer. Turmoil in the leadership of the U.K.’s two largest parties threatens to leave a political vacuum that could slow a possible resolution.
Unless these questions are answered and a clear path forward emerges, expect the pound to continue to weaken, said Shaun Osborne, chief currency strategist at Scotiabank.
“We think investors should be prepared for the risk of [pound] weakness extending quite significantly in the next few months, while uncertainty surrounding how the U.K. moves forward persists,” Osborne said.
Full article: British pound could hit history-making dollar parity by end of 2016 (MarketWatch)