THE pound is likely to move to 104p sterling or higher this year, according to the latest report from Bank of Ireland group treasury. The outlook for sterling is not promising, it says and the currency's performance will depend on economic figures and the pace at which the political agenda unfolds.
The pound rose strongly against sterling last year and, since November, has been trading between 102p and 103.7p sterling. The strong growth of the Irish economy this year and the uncertain prospects for the British currency means that the pound should continue to rise, according to Bank of Ireland.
The Irish currency should also remain strong against the US dollar, it believes and should average around $1.59 this year.
The biggest concerns about sterling surround political factors, according to the report. The prospect of an early election and the weakness of the Conservative party are worrying the markets, according to the report.
The report is sceptical on the plans for EU economic and monetary union. Downward revisions to growth prospects for countries such as France and Germany will seriously test EMU plans over the coming year and postponement of the timetable of moving to the single currency "remains inevitable".
In Ireland, it is difficult to make the case for lower interest rates, it says, "even if the Bundesbank eases again". However, with the inflation rate remaining low, interest rates should remain close to current levels for the first half of the year at least.
