Pound bulls still have reason to be optimistic following the Bank of England’s attempts to temper interest-rate expectations, according to banks from Bank of New York Mellon to Mizuho Bank Ltd.
While the currency tumbled yesterday after the BOE’s quarterly Inflation Report pushed back forecasts of when borrowing costs will increase, strategists said the strong U.K. economy will underpin sterling. The currency remains just 2 cents from its almost five-year high versus the dollar reached last week.
“Sterling will come back to fight another day,” Gavin Friend, a foreign-exchange strategist at National Australia Bank in London, said in a telephone interview yesterday. “The dynamics of a strengthening economy place the U.K. well above its peers and it’s likely to be the first major economy to raise interest rates.”