Sterling and the euro remain headed for parity, possibly by the end of this year, according to the latest economic briefing released by HSBC.The bank said that “recent trends”, such as the turbulence caused by Brexit and the strengthening of the European economy, would only need to continue for a few more months before the two currencies likely achieve parity.
Sterling and the euro remain headed for parity, possibly by the end of this year, according to the latest economic briefing released by HSBC.
The bank said that “recent trends”, such as the turbulence caused by Brexit and the strengthening of the European economy, would only need to continue for a few more months before the two currencies likely achieve parity.
HSBC added that while parity may not be achieved by the end of the year, further depreciation of the pound looks a lot more likely than any potential revival in the UK currency.
HSBC is the second major banking institution in a matter of days to forecast sterling-euro parity, following Morgan Stanley’s prediction last week that both currencies would achieve parity before year-end.
Eurozone economic growth
In this economic briefing, HSBC said the real story of the year has been the resurgence of the euro, which strengthened 13% against the US dollar since January, thanks to healthy GDP growth above 2%.
While the economic picture right across the Eurozone has improved, including in the southern fringe, Brexit negotiations and the inability of the Trump administration to make headway on tax cuts and infrastructure spending, are creating selling pressure on both sterling and the US dollar.
HSBC also cited the “unusual” economic landscape in the UK at present, where job creation remained robust despite a notable deceleration of economic activity in the UK in the last 12 months.
UK inflation is once again running ahead of wage growth, which will inevitably start to dampen consumer spending in the UK.
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