The pound is 'extremely vulnerable' right now — but Goldman Sachs thinks it is heading for a big jump

Action Images / Tony O’Brien Livepic
  • The chief investment officer of Goldman Sachs’ investment management division backs a major appreciation in the value of the British pound.
  • Sharmin Mossavar-Rahmani said there is the potential for a 10% gain in the pound going forward.
  • Other analysts are not so keen, with ING’s Viraj Patel saying the pound is “extremely vulnerable.”
  • You can follow the British pound here.

Goldman Sachs is hot on Britain right now.

Just days after predicting England will make it all the way to the final of the 2018 World Cup, the investment bank is back with another positive call on the UK, arguing the British pound could be set for a major appreciation in the coming months.

A team from the bank’s investment management division wrote this week that there is scope for the pound to rise by as much as 10% going forward, and for the currency to climb back above the 1.40 mark against the dollar, a level it most recently hit back in April.

“There is a 10% appreciation potential there,” Sharmin Mossavar-Rahmani, the CIO of the division said on Wednesday. Within the next 12 months, Mossavar-Rahmani added, the pound could hit $US1.41, a rise of around 7.6% from its current level against the dollar.

The pound has ridden something of a roller coaster in the two years since the UK voted to leave the European Union, dropping from close to $US1.50 to a low of $US1.20, before rebounding to almost where it was trading before the referendum early in 2018.

As Brexit talks have seemingly gone nowhere in the weeks since then, the pound has lost close to 7% of its value, as the chart below shows:

Screen Shot 2018 06 28 at 14.42.36Markets Insider

Some analysts believe the pound is on fragile ground and could suffer further losses, with Viraj Patel, an FX strategist at Dutch bank ING, warning that it is “extremely vulnerable.”

“Base case is that GBPUSD holds 1.30,” he added, according to currency site Pound Sterling Live. “But if EURGBP posts a topside breakout from its narrow range, it doesn’t look pretty for GBP. Surprisingly UK data has been OK, but it won’t take much bad Brexit news to take the pound down.”

It’s worth noting that Patel has been extremely bullish on sterling in recent months, calling the pound the “darling of the currency world” during its strong period in April, so his change of face could be a significant sign of what’s to come for sterling.

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