Sterling takes a pounding, but is it near its lows?

Undervalued by 26%

clock • 4 min read

It is perhaps little wonder that investors should be glancing nervously at the pound. The last time inflation ripped higher during the 1970s, a sterling crisis ensued.

Is there another crash in the offing? We think there are risks. But at some point, possibly at valuations not too far below where the pound now sits, so much bad news will have been priced in that the currency will look a bargain. Certainly, the UK has a plethora of problems. There is the energy shock, rising public debt, a big trade deficit and looming recessionary risks set against a backdrop of one of the highest inflation rates in the developed world. All of which, in part, explains why sterling trades at such a steep discount against the dollar. We estimate sterling is undervalue...

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