A GBP/USD Price Forecast: Calm Before the Storm For Pound
A GBP/USD Price Forecast: Calm Before the Storm for Pound
The pound has slid to its weakest level against the dollar in five years on Monday, and the Bank of England and Treasury have spoken out in attempts to calm investors. The pound has been weakened by a range of factors, including global growth and the rise of the US dollar.
UK Fiscal Policy U-turn boosts confidence
The Bank of England and the British government have made a U-turn on their fiscal policy, which has had a positive impact on the pound. This brings confidence back to the currency, which may be beneficial in its battle against the dollar.
Economic Data Boosts the Pound
This week’s UK GDP report should give GBP/USD a boost. It’s expected to show a modest gain in the second quarter, following a strong increase in the first quarter.
UK Manufacturing data should also support the pound, with a slowing in production expected. This should also help to ease trade frictions with the EU, which is likely to help boost the pound even further.
The Fed could pivot soon
In response to the latest US data, traders increased their bets that the Fed will slow down its tightening cycle, which is weighing on the US dollar. It’s possible that the Fed will decide to pivot in November, when it releases its next interest rate decision.
US Inflation Remains stubborn
The American CPI showed that inflation remained stubborn, which was a big shock to the markets. The Federal Reserve raised its interest rates a couple of weeks ago, and the GBP/USD suffered in response to this move.
Despite the pound’s decline, many analysts predict that it will continue to strengthen in the future. ING sees it rising to 1.37 by the end of the year, while analysts at CIBC Capital Markets expect the pound to fall early in 2022 and then rise to 1.36 by the end of the year.
A GBP/USD Price Forecast: Calm before the Storm for the Pound
Despite its recent losses, the pound is still holding up well against other currencies. It has managed to avoid a crash and has rallied over the past month, but there is still room for more gains. The 1.2000 psychological support handle remains firm but it will need to hold to prevent the pair from falling further. If the pair breaks through this level, it will likely move on to test the key resistance levels at $1.2244 and $1.2406.
