Leading economist Charu Chanana of investment platform Saxo said the pound could ‘extend its dominance’ over other currencies, including the Euro.
- Political stability in the UK will allow the pound to extend its dominance as Europe faces unstable political developments
- The pound could see pressure if the Bank of England signals a rate cut however it is unlikely.
France’s outgoing finance minister warned the country is facing an ‘immediate financial crisis’ following the second round of the elections.
The French government was sent into chaos after Emmanuel Macron’s centrists, the Ensemble alliance, staged an unexpected comeback but failed to reach a majority, meaning a coalition must be formed or face a hung parliament.
But, Saxo’s Charu Chanana said the ‘unstable’ developments in Europe and political ‘stability’ in the UK make room for the pound to ‘extend its dominance over other major currencies’.
Saxo’s Head of FX Strategy, Charu Chanana, said, “Sterling’s bullish run in H1 came on the back of improving economic momentum. Political stability has given further room to sterling to extend its dominance over other major currencies, especially as it comes in a sharp contrast to the unstable political developments in other parts of Europe. This gives a downside bias to EURGBP in the medium term.
“There is a risk that Bank of England MPC members will start to signal a rate cut if services inflation continues to soften. This could create some downside pressures on sterling, but BOE rate cut cycle is unlikely to remain any more aggressive than the Fed, and hence relative weakness in sterling should remain contained.”
