Europe Markets

Despite Brexit uncertainty, some analysts are turning bullish on UK assets

Key Points
  • HSBC's currency strategy team has forecast sterling to reach $1.37 by the end of 2019.
  • EY Global Assurance Leader says U.K. banks showing "real upside" driven by cost.
Dollar still has plenty of room to move higher, strategist says

Sterling and U.K. equities, particularly banks, are offering a surprisingly positive outlook, market experts told CNBC Friday.

The Bank of England (BOE) held interest rates steady Thursday while revising up its GDP (gross domestic product) growth forecasts for 2019 on the back of strong first-quarter data. In a press conference following the announcement, Governor Mark Carney hinted at future rate hikes, striking a slightly more hawkish tone despite ongoing uncertainty over the U.K.'s departure from the European Union.

HSBC Global Head of Foreign Exchange Strategy David Bloom said a substantial dovish slant in the market meant it was refusing to price in more hawkish signals from central banks. If Brexit was put aside, however, and investment growth in the U.K. was to ramp up again, the BOE "might turn a little more hawkish," he told CNBC's "Squawk Box Europe" Friday.

"We're quite bullish on sterling actually, as we think it's got plenty of room to rise against the dollar," Bloom said.

Sterling closed trading at just over $1.30 Thursday, but HSBC's currency strategy team has forecast it to reach $1.37 by the end of 2019.

On the equity front, EY Global Assurance Leader Keith Pogson said U.K. banks were surprisingly well positioned to navigate the political uncertainty across major European economies.

UK is looking like one of the better markets at the moment: Expert

"There's a lot of uncertainty, there's not a lot of growth, the interest rate environment is not changing so the banks aren't getting a lift from interest rates, and markets have been tough," he told CNBC's "Capital Connection" Friday.

But Pogson suggested the "real upside" for European banks is being driven by cost, and whether banking giants can reduce cost for the technological innovation they need in order to remain competitive.

"Bizarrely, the U.K. is looking like one of the better markets at the moment," he said.

"Brexit aside, the ability to rationalize branch networks and other cost programs are actually showing quite a lot of upside. The U.K. banks that have announced (earnings) so far are generally showing pretty positive drivers on the cost side," he added.