Are the low levels in sterling justified? Well… kind of!

David Fenton at RBS:

"Looking ahead there seems to be some justification for the lower GBP/USD exchange rate.

"The US is a number of steps ahead of the UK on the road to recovery and monetary policy messages from the Federal Reserve have spoken about putting the brakes on additional monetary stimulus.

"On balance we expect GBP/USD to continue to trade around 1.50 – probably dipping into the high 1.40s in 2013. The GBP/EUR rate meanwhile looks a little low at present.

"The Italian election provides a stark reminder of the continued risks from the Eurozone debt crisis.

"Furthermore, the region remains mired in recession, which should trigger a rate cut from the ECB. On balance we expect GBP to appreciate a little against the euro in 2013, albeit not reaching highs seen during the peak of crisis in mid 2012."


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