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While citing the UK’s ability to finance its twin deficits and upbeat business confidence, analysts at the Australia and New Zealand Banking Group (ANZ) expect GBP/USD to reach 1.3600 by the year-end.

Key quotes

UK fiscal policy looks poised to become more expansionary in support of the government’s Brexit and regional re-leveling agendas. Government spending could add more than 1% to GDP in FY20/21.

Trade talks with the EU will start next month. Both sides want a comprehensive trade agreement, but opinions differ on how to achieve that. Negotiations need to reach a landing zone.

Despite the intense uncertainty in the second half of last year, the UK is exhibiting no problems in financing its twin deficits. Business confidence is rising, Brexit anxiety is falling and sterling is cheap. We anticipate a jagged, but gradual appreciation.