With Brexit talks entering a crucial stage in 2018, currency strategists believe there will be a resurgence in the pound sterling as the details of the UK’s final position out of the European Union becomes more apparent.
“The Brexit issue is set to remain the main driver for GBP in 2018,” according to Danske Bank where analysts are bettering the pound will recover against the euro in 2018.
The strategy note, seen by Pound Sterling Live added: “While uncertainty and fundamentals justify an undervalued GBP for now, we see prospects of a recovery in 2018 as clarification on Brexit increases.”
GETTYPound to euro exchange rate: Sterling to rally as Brexit negotiations rumble on
We see prospects of a recovery in 2018 as clarification on Brexit increases
The pound is currently trading at €1.1246, according to Bloomberg, at 15.41, on January 3.
Dankse Bank, however, said pound sterling has shown in the past it likes talks of transitional talks – which we occupy Theresa May’s time in 2018 – and should further be revealed in the opening months of 2018 GBP could well go higher.
“This should eventually bring investors back to GBP assets due to attractive valuations,” said Danske Bank.
“What matters for GBP is the future EU-UK relationship and, not least, reassurance that it can avoid a ‘cliff-edge Brexit’, where there is no deal and not play when the current two-year negotiation window formally ends and the UK formally leaves the EU.”
The pound has also risen sharply against the dollar as blue-chip index loses end-of-year-gains during the first hours of trading.
As FTSE firms return for their first day of work in 2018, a sluggish start to the year for the UK's blue-chip index with the FTSE 100 is down 0.7 per cent from the record high at which it finished 2017, and Germany and France's main stock indexes are suffering similar falls.
Spreadex analyst Connor Campbell told the BBC there is "the definite sense that the markets are not at full force just yet". Instead, they are "gradually easing themselves back into a full-time schedule," he says.
Stong gains for the Pound and Euro gains against the dollar have also contributed.
The pound is now up against both the euro and the dollar.
Sterling is up 0.1 percent against the euro to 1.1258, and up 0.29 percent against the dollar to 1.3549.