LONDON (Reuters) - Bank of America Merrill Lynch (NYSE:BAC) and Goldman Sachs (NYSE:GS) cut their near-term forecasts for sterling to just below current levels on Friday, both saying that further losses after last week's shock Brexit vote may be limited by the end of this year.
After the biggest daily fall in the pound in modern history on Friday, both U.S. banks were forced to slash their forecasts for the rest of 2016, in BAML's case by almost 30 cents.
Goldman, however, forecast the pound would be trading Monday's levels of $1.34 at the end of the year and forecast the pound to gain steadily after bottoming out against both the euro and dollar over the next three months.
"In the medium term, we think the Pound regains some strength," Goldman strategists said in a note.
"We do not expect a political uncertainty shock as large as that of Lehman or with the same global consequences. While we do now expect the UK to enter a technical recession in the first half of 2017, it should be a mild one by historical standards."