Société Générale, one of the leading investment banks in France, has predicted that the British pound (GBP) will gradually rise towards the 1.30 level against the US dollar (USD). According to the bank’s economists, the performance of GBP/USD will track that of EUR/GBP, which is expected to remain stable in the coming months.
The bank’s forecast is based on several factors, including the global economic recovery, the progress of COVID-19 vaccination programs, and the outlook for UK monetary policy. While the pandemic has had a significant impact on the world economy, the rollout of vaccines has boosted hopes for a strong recovery in the second half of 2021.
The Global Economic Recovery
The global economic recovery is one of the key factors that could support the pound’s performance in the coming months. As the world emerges from the pandemic, many countries are experiencing a strong rebound in economic activity. This could lead to increased demand for UK exports, which would support the pound.
Furthermore, the Bank of England (BoE) has indicated that it expects the UK economy to rebound strongly in 2021, with GDP growth forecast to be around 7.25%. This optimism is based on the assumption that the pandemic will be brought under control, and that consumer spending and business investment will rebound as restrictions are lifted.
COVID-19 Vaccination Programs
The progress of COVID-19 vaccination programs is another important factor that could impact the pound’s performance in the coming months. The UK has been one of the leaders in terms of vaccine distribution, with over 50% of the population having received at least one dose. This has helped to reduce the number of cases and hospitalizations, and could lead to a faster reopening of the economy.
The faster the UK can reopen its economy, the better it will be for the pound. As businesses reopen and consumers return to their normal spending patterns, the economy will begin to recover more quickly. This could lead to increased demand for the pound and a boost to its value.
UK Monetary Policy
The outlook for UK monetary policy is another factor that could impact the pound’s performance in the coming months. The Bank of England has indicated that it is not planning to raise interest rates anytime soon, as it wants to support the economic recovery. This is likely to keep the pound’s value relatively stable in the short term.
However, the Bank of England could change its stance if inflation rises faster than expected. If this happens, the bank may need to raise interest rates to prevent inflation from getting out of control. This could lead to a stronger pound in the medium to long term.
In conclusion, Société Générale expects the British pound to gradually rise towards the 1.30 level against the US dollar, tracking the performance of EUR/GBP. The global economic recovery, progress of COVID-19 vaccination programs, and outlook for UK monetary policy are all factors that could impact the pound’s performance in the coming months.
While there are risks to this outlook, including the potential for new variants of COVID-19 and geopolitical tensions, the overall outlook for the pound is positive. Investors should monitor these factors closely and adjust their portfolios accordingly to take advantage of potential opportunities.