UK: Economic growth to pick back up - Wells Fargo

Analysts at Wells Fargo, looks for the pound to strengthen against the dollar in the medium term, as the Bank of England resumes its tightening path.

Key Quotes:

“Real GDP growth in the U.K. was a disappointing 1.2 percent year over year in Q1. The slower print brings to light questions on the underlying strength of the British economy, especially in the wake of the Brexit referendum in 2016 and more recent negotiations on the future of financial and trade relationships with the Eurozone.”

“We look for economic growth to pick back up, while inflation should continue to move back toward target in the coming months.”

“BoE continues to see a limited degree of slack in the U.K. economy, and we look for the BoE to hike its policy rate in August after examining incoming data in the next few months. Our currency strategy team looks for the pound to strengthen against the dollar in the medium term, as the BoE resumes its tightening path.”

“Stronger economic growth should also be supportive of gradual rate hikes, and we look for the U.K. economy to expand 1.2 percent this year and 1.8 percent in 2019.”