A near-term fall in the British pound would offer investors a clear buying opportunity, according to one strategist, who said the currency was set to get a boost next year as a result of the U.K. leaving the European Union.
Manish Singh, chief investment officer at Crossbridge Capital, said on Thursday that the “benefits from Brexit (are) going to accrue over (the) medium-term.”
He expects the pound this year to hold at its current level against the dollar (around $1.3626 at the time of writing) or head to $1.40, “but not beyond that, and if it gets to $1.30, then it’s a screaming buy.”
Singh told CNBC’s “Squawk Box Europe” that the pound would only move higher than the $1.40 mark next year, “on the benefits of Brexit accruing over time.”
Britain formally left the EU trading bloc on Dec. 31, ending a year-long transition period. The pound has wavered against the dollar since Jan. 1, and is currently down around 0.3%.
New trading arrangements between the U.K. and the EU kicked in at the start of the year, but companies have already experienced disruption in getting goods across the border, according to numerous reports.
“Of course at this time, the government and everyone is fully consumed by everything that is happening on the Covid front and that has to go away, or at least thin down, before you see other policy moves,” Singh said, referring to the U.K. government rolling out more post-Brexit policies.
In terms of the dollar, Singh said that the consensus view was that the U.S. currency would weaken this year, highlighting that some analysts expect it to plummet by as much as 20%-30%.
Economist Stephen Roach told CNBC’s “Trading Nation” earlier this week that he foresaw “another 15% to 20% downside to the broad dollar index over the course of this year,” having predicted in June a 35% fall in the next year or two.
Meanwhile, Standard Chartered Bank CIO Steve Brice told CNBC’s “Capital Connection” last week that the firm expected the dollar to possibly weaken between 5% to 7% over the next 12 months.
However, Crossbridge Capital’s Singh stressed the U.S. was vaccinating against the coronavirus at a “rapid pace,” and that if the country’s gross domestic product or economic data beat expectations, the era of dollar weakness — which has been driving other currencies, including sterling, higher — could be over.
