UK: Pound is undervalued against USD – Lloyds Bank

Carl Paraskevas, Research Analyst at Lloyds Bank, suggests that they still very much believe that the British pound is undervalued against the US dollar over the longer term.

Key Quotes

“A number of valuation metrics and models point to undervaluation of anywhere between 5% and 18%. Hence we expect GBP/USD will rise to 1.34 against the US dollar by the end of next year. The recent move higher in GBP/USD just looks excessive in terms of our current underlying macroeconomic views. Still, we must concede that underlying economic developments both in the US and UK since last month leave the risks to our GBP/USD skewed more to the upside. For now, however, this leaves us only more confident that GBP/USD will consolidate at higher levels than it did over the last four months.”