Pound rebounds as investors' no-deal Brexit concerns ease

Sterling rose against the dollar into a strong recovery level, hovering around $1.25, with the currency bouyed by a reduction in interest rates, John Ashcroft, author of the Saturday Economist, told IGTV.

Last week, the ECB announced a new stimulus package in a bid to stop the weakened eurozone economy falling into a recession, with the central bank cutting interest rates and looking to inject another €20 billion a month into the financial markets.

Across the Atlantic, the US Federal Reserve opted to cut interest rates by a 0.25% percentage points this week but hinted that it is unlikely to slash rates again this year or next. Both central bank’s fresh round of stimulus helped strengthen the pound against the dollar and the euro.

Sterling likely to see a lot of ‘overhead resistance’

Despite the pound rallying this week, in part because of renewed optimism about the UK avoiding a no-deal Brexit, the currency will see ‘a lot of overhead resistance’, with sterling likely to trade within in a tight band of between $1.23 to $1.25+, Ashcroft said.

The pound will continue to trade within that range for some time and is unlikely to move higher until investors get clarity on Brexit, which could precipitate a breakout above those levels, he added.

British banks and property set for ‘reversal opportunities’

The FTSE 100 is trapped at 1,730 levels and will likely stay there until a resolution on the US-China trade war is found, which could see the blue-chip index breakout to 7,500 levels, Ashcroft said.

However, there is potential for UK lenders and British property developers’ stocks to see ‘reversal opportunties’ after being punished by investors, he added.

British banks could see their stocks make gains as the bond cycle turns, with Barclays, Royal Bank of Scotland and Lloyds all showing signs of reversal.