The British pound is under pressure today on the back of renewed US dollar strength but one of the world’s largest banks believes a big play is just around the corner.
At 3.33pm (GMT) the British currency was trading at $1.2440 down from $1.2481 in yesterday’s trading.
Bank of America have advised their clients that they expect one last major drop in the British pound, which they predict will happen when British Prime minister Theresa May triggers article 50, the mechanism for The UK to leave the European Union.
After this, they expect the pound will make a stunning reversal as the UK negotiates favorable trade deals and economic benefits because of Brexit.
On this basis, the have placed a buy recommendation on the pound immediately after the triggering of article 50, with a price target of around $1.4000 against it’s US counterpart which will happen without the volatility that has surrounded the pound ever since Brexit was announced last year.
“We expect one final dip in GBP as Article 50 is formally triggered and as the EU formally responds and sets out its negotiating position. We think the crystallization of risks and the start of the countdown to Brexit may prove to be the low in GBP and the opportunity to enter GBP longs,” noted BOA analysts,
'We have no doubt that many political hurdles lay ahead for the pound in the years ahead, but we doubt that the markets will be in a perpetual state of panic over every Brexit-related headline.' They added.