Sterling predicted to bounce back

Wednesday, 24 December 2008 10:03

The pound is ending 2008 with lows against the euro and the dollar, but 2009 could see a bounce back.

Sterling has suffered in 2008 for a number of reasons, such as the weakness of the UK economy, the sharp cutting of UK interest rates, and the early weaknesses of the US economy.

Over the last year sterling has fallen from over $2 to £1, to the current level of £1 buying $1.48.

Meanwhile against the euro, £1 has fallen from ?1.35 to ?1.04.

The Hargreaves Lansdown Sterling Outlook bringing together the views of ten leading currency specialists from JPMorgan, M&G, New Star and Schroders among others - points to the pound bouncing back.

All the experts predicted sterling to be worth between ?1.00 and ?1.30 by the end of 2009, with half expecting a return to the ?¿1.201 to ¿?1.300 level.

It is claimed demand for sterling could rise as UK exports become cheaper and imports more expensive, while the euro could loose value as the continent turns to recession.

Against the dollar, half of those surveyed expected sterling to end 2009 between $1.351 and $1.500. Forty per cent thought sterling would be over $1.50 -  with the main theme being the US currency weakening.

However, the report does warn: "Exchanges rates are notoriously difficult to forecast, even more so in the current economic climate.

"Crucial factors influencing exchange rates in 2009 will include: relative speed of recovery from recession, government borrowing and spending, risk-aversion, currency speculation and interest rates."

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