A duo of Wall Street banks is warning on the “grim” outlook for the pound, predicting that stubbornly high inflation and an economic slowdown will precipitate further declines for the UK currency.
The pound has lost ground against most key rivals this year, despite four UK interest rate rises since December as the Bank of England began the process of tightening monetary policy ahead of other major central banks. The sharpest losses have come over the past six weeks as investors grow increasingly concerned about a cost of living crisis, which the BoE cautioned could push the UK into recession later in 2022.
Sterling has steadied recently as a broad dollar rally goes into reverse, but remains close to the lowest level since early 2021 against a basket of currencies of the UK’s trading partners.