Data released last week showed that the UK economy continued to grow strongly in the second quarter, and combined with a well-performing labor market in recent months, these factors have collectively driven the pound to rebound from its early August lows. Additionally, despite the Bank of England's tight monetary policy exerting downward pressure on economic growth and inflation, causing July's inflation data to be lower than expected, retail sales have remained strong.
However, strategists at Bank of America Global Research believe that the pound still has further potential to rise. They predict that by the end of the year, the pound will climb to 1.35 against the dollar and to 1.20 against the euro (equivalent to the euro falling to 0.8333 against the pound).
In a briefing released on Thursday, they noted: "The pound remains one of the best-performing G10 currencies this year. Fundamental and long-term positive factors still exist, and we believe the recent weakness does not reflect the UK's prospects. All other things being equal, there is still a strong case for the pound to rise against the euro, yen, and Swiss franc, but this also means it is susceptible to any short-term fluctuations."
Notably, the exchange rate of the pound against the yen could rise to 213.60, which would be the highest level since just before the global financial crisis in 2008.
As of 9:17 AM Beijing time on August 19, the pound-dollar exchange rate was 1.2943/44.
