HSBC acknowledged defeat: bearish forecasts for the pound did not materialize

In HSBC, their forecasts for the pound / dollar at the level of 1.20 were recognized as erroneous. The analytical note published by the bank on Monday says that “the currency for the entire year of 2017 ignores the political intrigue of Brexit.” David Bloom, HSBC strategist, said that the pound is likely to end the year near 1.35, not 1.20 as previously thought. “The Bank of England showed an uncontrollable desire to join other B10 central banks in the race for refusal of monetary accommodation, which gave the pound additional acceleration,” he said. Last week, after the Bank of England hinted investors on a more aggressive policy, the pound rose to the highs in the 1.36 area. Moreover, one of the most famous “pigeons” in the camp of the Central Bank also spoke in favor of tightening.

Still, Bloom is not in a hurry to finally throw out the white flag: “We are wounded but not defeated, we are moving our forecasts for 2018 and we are still waiting for the devaluation of the pound.” According to him, Breksit watch continues to tick, reinforcing the political influence on the dynamics of exchange rates. “Meanwhile, the strict dependence of the pound on the forecast for the rates suggests that political risks are almost not included in the price; such carelessness increases the asymmetry of risks by inclined them in a bearish direction, “he explained. Bloom believes that next year the pound will gradually decrease from the level of 1.33 to 1.26.

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