(Bloomberg) -- Columbia Threadneedle Investments sees the pound climbing to levels last seen before the Brexit vote, by far the most bullish call among peers, as the UK eases policy at a slower pace than the US.
Sterling will move toward $1.50 next year as comparatively high interest rates bolster the appeal of the nation’s securities, according to Steven Bell, chief EMEA economist at the UK asset manager. The closest forecast in a Bloomberg poll is for a rise to $1.42 by the end of next year.
Since the Fed’s 50 basis-point reduction on Sept. 18, investors have priced an aggressive cycle of cuts, while the Bank of England left its key rate on hold and is forecast to deliver smaller reductions over the next year.
Bell’s prediction implies the pound stands to strengthen almost 13% from its current level around $1.33, already near the highest in two and a half years. The UK currency is the best-performer in the G-10 this year, advancing nearly 5% versus the greenback.
Bell shrugged off concerns that the tax hikes and austerity measures expected in the UK budget at the end of the month will derail the pound’s gains. With higher taxes likely centered around capital gains, their impact on demand will be limited and are unlikely to shake consumer confidence, he said.
Market pricing shows traders betting the BOE will deliver a total of about 120 basis points of easing by June next year, versus 165 basis points from the Fed.
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