Deutsche Bank last year was already predicting a plunge in 2016 to $1.27, a level that has not been seen since 1985, when the Live Aid charity concert was rocking north-west London and England’s football teams were banned from European club competitions.
The world’s second-biggest currency trader’s view has been joined by a growing number of bears this year.
ING Bank predicts the pound will slide 8% to $1.32 by the end of June and Credit Suisse sees it dropping to $1.40 in three months and $1.33 in a year.
Nomura is forecasting $1.41 in the middle of 2016, compared with a previous call of $1.52.
Strategists are racing to downgrade their forecasts for a currency that is being knocked by a litany of woes from the prospect of record-low interest rates being entrenched for longer and a possible exit from the EU that business leaders say will damage Britain.
Analysts’ forecasts for the sterling-dollar exchange rate by June have dropped 2% in the past month, even as they failed to keep up with its almost 5% slide in that period.
The UK currency “doesn’t have many friends at all”, said Jane Foley, a foreign-exchange strategist at Rabobank, whose $1.44 mid-year forecast has already been surpassed.
“It’s easy to stack up the negative sterling reasons,” said Ms Foley.
“We’ve had disappointing economic data, inflation is very weak, the market is pushing back expectations about interest-rate hikes, and there will be political issues this year.”
Sterling has declined 2.7% this year, after sliding 5.4% through 2015 and 5.9% a year earlier. Sterling has weakened 3% versus the euro since the end of December.
Calling the pound proved to be tricky during 2015, with the currency ending about 5% weaker than the $1.55 median of analysts’ predictions as of December 2014.
Michael Rake, chairman of BT Group, and Barclays chairman John McFarlane became the latest business leaders to warn that a vote to leave the EU would damage the country and that the ‘Brexit’ debate has already cost the UK foreign investment.
Bank of England officials kept the benchmark interest rate at a record-low 0.5% on Thursday, where it has been since March 2009, and said the outlook for growth and inflation has weakened further.
Concerns about Britain’s future in the EU and a weak domestic recovery have weighed on the pound since the start of the year.
This has coincided with money-market traders further delaying the timing of when the Bank of England will lift interest rates for the first time since July 2007.