By Jonathan Cable
LONDON (Reuters) - Britain's pound will have regained some of its lost ground against the dollar in a year but forecasts in a Reuters poll were slashed from a month ago as the coronavirus pandemic continues to wreak havoc globally.
Sterling
On March 20 the pound sank to its lowest level in 35 years.
"Over the last four to six weeks we have seen an indiscriminate sell-off of currencies - a bit like the baby being thrown out with the bathwater," said Chris Turner at ING.
"As things return to normal, the dollar should return some of its recent gains."
Trading around $1.24 on Thursday, cable will be at $1.22 in a month, but then strengthen to $1.25 in six months and by 4% to about $1.29 in a year, according to the median estimate of over 50 foreign exchange specialists polled March 27-April 2.
"Assuming the virus is contained and lockdowns begin to ease in the second half of Q2, we see scope for GBP gains versus the dollar," MUFG told clients.
However, as sterling has plummeted those forecasts were a sharp climbdown from the respective $1.29, $1.32 and $1.35 predictions made only a month ago. That was the biggest monthly drop in the 12-month outlook since Britons voted to leave the European Union in June 2016.
The 12-month forecast range was wide - highlighting the uncertainty - from as low as $1.13 to a high of $1.41.
MONETARY EASING
Adding to the currency's woes, the Bank of England, like dozens of other central banks, has loosened monetary policy. It made two emergency cuts to its Bank Rate, taking it to 0.10%, ramping up its bond-buying programme and promising more asset purchases if needed to stop a coronavirus-related shutdown from plunging Britain into a long recession.
Finance Minister Rishi Sunak, for his part, has announced an unprecedented fiscal stimulus plan to try and keep the economy afloat. [L4N2BH3SH]
"The performance in FX markets over the coming months will likely also be driven more by evidence of how policy measures are playing a role in economic recovery. We see the steps taken by the UK government as positive," MUFG noted.
As the virus sweeps across Europe, governments in the euro zone have also unveiled huge stimulus measures and the European Central Bank has increased its asset purchase target for this year to around 1.1 trillion euros.
Against the euro (EURGBP=) sterling will fare worse than was expected last month. On Thursday one euro would get you about 88 pence and the poll suggested it would be worth 90p in one and six months, and then 88p again in a year.
In the March poll the respective forecasts were all 85p.
(Other stories from the global foreign exchange poll:)
(Polling by Khushboo Mittal, Indradip Ghosh and Sujith Pai; Editing by Ross Finley and Gareth Jones)