Investing
Sterling faces ‘triple cocktail’ threat in 2013
HSBC says sterling will weaken this year as it faces a “triple cocktail” of potentially destructive factors from China, the US and the eurozone.
The 2013 HSBC View forecasts sterling will fall to $1.52 against the US dollar by the end of this year, down 5% from its current value of $1.60.
“The pound’s fiscal credibility is under threat as a sovereign downgrade looms,” the bank said.
It warned the UK currency will also face pressure from three global factors: the resolution of the fiscal cliff in the US, increased momentum in China and improvements in the eurozone.
“The pound looks set to lose the contest of the uglies,” the HSBC report said, “as its “frailties emerge from the shadows.”
HSBC predicts significant swings in share prices this year, but is bullish on the prospects for equities against bonds.
It said investors may switch from bonds to shares in 2013 as fixed income continues to deliver disappointing returns.
The FTSE 100 is up almost 3% in the first few days of trading this year, although it closed yesterday down 0.4% at 6,064. The index rose 5.8% over 2012.
