Goldman Sachs has predicted the value of the pound will surge against the dollar in the year ahead, in a big win for British tourists.
The US investment banking goliath is forecasting that the pound will buy $1.40 in 12 months time, up from the $1.33 it buys currently, The Telegraph reports.
It comes after the US Federal Reserve slashed interest rates by a sizeable half a percentage point last week, after which the pound rose one percent against the dollar.
The company has also slashed its predictions for the value of the USD – the global economy’s reserve currency – against a number of world currencies, including the yen and euro, the outlet reports.
According to Goldman, the US Federal Reserve has shown a “willingness to respond more aggressively to that risk relative to peers”, as per the newspaper.
The Bank of England (BoE) was described by the Wall Street firm as “patient” and is expected to be more conservative than their counterparts in the Fed.
“The BoE kept rates on hold and sent a slightly hawkish message [last] week, emphasising a ‘gradual’ approach to removing policy restraint,” the bank said.
Goldman also warned that the cuts that the Fed kicked off last week will hurt the value of the dollar.
The first “jumbo” rate cut was perceived by experts to be a signal that rates had been kept at elevated levels for too long, out of step with most of the other major central banks, Euronews reports.
As of Monday morning, the pound was trading slightly lower – at $1.3273 – after a 1.5 percent spike last week, Yahoo Finance reports.
The recent strength of the pound was fuelled by a global equity markets rally, as well as expectations from investors of further interest rate cuts in the US, according to the outlet.
