Long-term outlook for the British pound sterling: GBP looks 'relatively cheap' against the euro say TD Securities

 According to TD Securities the near-term focus will be on the looming transition between out-going BoE Governor King and his replacement, Mark Carney.

Analyst Shaun Osborne predicts the end of sterling underperformance will come to an end:

"The UK economy remains in slow-growth mode, even if it managed to avoid the ignominy of the “triple dip”.

"We do not expect any significant policy changes under the Carney regime, at least initially. Policy makers will want to assess the efficacy of current stimulus measures before deciding whether additional steps are needed.

"We think the GBP looks relatively cheap against the EUR at current levels and look for a modest decline in the cross through the balance of the year (we target 0.84 by year-end).

"On a trade-weighted basis, the GBP has traded in a well-defined band since 2008 and we look for a continuation in this trend going forward.

"Economic activity in the UK remains sluggish, although even with a murky outlook for the recovery we see limited scope for more BoE easing in the near term (even with the transition to the new Governor Mark Carney).

"The GBP underperformance in May seems overdone in that context and we look for sterling to recover in the coming months."

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