THE euro will be worth more than the British pound by the end of the first quarter of 2018, analysts from Morgan Stanley has said in a client note circulated on Friday.

In the bank’s latest FX Overview paper, it is argued that a combination of a stronger euro and a weakening pound will combine to make the euro more valuable than the pound for the first time in its history, and make it — in terms of pure value — the strongest major currency.

The euro has been on the up this year as investors have taken note of the improving fortunes of the bloc’s economy.

Countries like Spain and France have helped the bloc recover to its best levels since the eurozone debt crisis.

The forecasts suggest the euro will continue to strengthen and will move ‘beyond parity’ with the pound during the first three months of the year, hitting a peak of £1.02 before weakening a little as the year progresses.

By the end of 2018, €1 will be worth £0.91.

“We expect EUR to stay strong as pension funds and insurance companies (such as those in Switzerland and Japan) start to increase their net EUR currency exposure from historically low levels,” the team writes.

“GBP is likely to weaken in its own right, driven by weak economic performance, low real yields and increasing political risks.

“Last year, the British economy maintained its growth momentum even after the Brexit vote, but the structure of growth has changed. The household sector has increased spending, primarily funded by unsecured lending, which is unsustainable.

“A consolidation of the household balance sheet, coupled with negative real wage growth, may reduce consumption, which has been propping up growth so far. Brexit uncertainty may also weigh on business investment, which will weaken the already lackluster productivity growth outlook, suggesting real rates staying low.”

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  1. The fall in the value of the pound is due to a great extent to the constant talking down of Britain and the economy by the Remoaners. Like it or not, the UK is leaving the EU and we should ALL be working hard to settle deals that mean we can continue to trade successfully with Europe as well as the larger markets elsewhere.

  2. The British always understood the EU as economic project only. After Brexit will be completed, the “rest” of the EU will be free for a deeper integration which had always been blocked by the UK.

    Within a world, which will be dominated by USA, China, India, Nigeria and Saudi-Arabia, the EU will remain as a big player which can hide its tradition of democracy, peace keeping, social welfare and economical strenght, and yes – a healthy currency – while the UK may become an isolated nobody like North Korea, where besides nuclear weapons nothing important will be left and with internal conflicts with Northern Ireland and rising tensions between upper class and lower class. Britain should contemplate on those results of Brexit instead of meditating on a “trade-deal” with the EU.

  3. cameraman, the pound is low against the Euro because the economy is on the skids and the UK is now seen as an unstable country both politically and economically. The Brexit negotiations are not going well, the EU27 hold all the cards and the markets know that the UK has a dangerously useless government that is ill-prepared for the 2019 cliff edge. So take yourself back (if you are in Spain that is) and get busy because if you voted for this garbage, you own it and the onus is on you to make it work. Enjoy.

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