Sterling would lose around 9 percent of its current value against the dollar and trade at $1.20 in the immediate aftermath of Britain leaving the EU without a deal, a Reuters poll of foreign exchange strategists predicted.
However, most economists expect the two sides to eventually agree a free trade deal, and medians in the Feb 28-March 5 poll of over 60 strategists said cable would be at $1.32 at the end of March as the divorce is due to take effect close to the $1.314 it was hovering around on Wednesday.
In six months’ time the pound will have strengthened to $1.35 and in a year to $1.39, the poll found, little changed from a February poll and still significantly below levels it was trading at before the June 2016 referendum vote to leave the bloc.
While no other respondents were that gloomy, even the most optimistic forecast for no-deal cable was a drop to $1.28.
“A disorderly Brexit – for us a very unlikely scenario – would push cable towards the cycle lows of $1.18-$1.20,” said Roberto Cobo Garcia at BBVA.
Likely offering some support for sterling, the U.S. Federal Reserve is in a holding pattern while the Bank of England is expected to raise borrowing costs towards the end of this year.
But interest rate differentials will provide little help for sterling versus the euro. The European Central Bank is seen delaying a rate hike from record lows until 2020.
Reuters news contributed to this article..