British Pound to Dollar Forecast: GBP/USD Clings to 1.30 as Traders Eye BoE
– Written by
Frank Davies
STORY LINK British Pound to Dollar Forecast: GBP/USD Clings to 1.30 as Traders Eye BoE
The Pound-to-Dollar exchange rate (GBP/USD) held just above 1.3000 on Wednesday, trading around 1.3020, as stronger-than-expected US data and lingering doubts over another Fed rate cut kept the dollar firm ahead of Thursday’s Bank of England policy decision.
GBP/USD Forecasts: Battling to Hold 1.30 Support into BoE Call
The Pound found support just above 1.3000 against the US Dollar on Wednesday and traded around 1.3020 after the latest US data came in slightly stronger than expected.
Sterling markets were subdued ahead of Thursday’s Bank of England policy decision.
The dollar maintained a firm tone amid further doubts whether another Fed rate cut in December was realistic.
Equity markets were fragile, but losses were limited and the FTSE 100 index was in positive territory which limited the scope for further Pound selling.
UoB commented; “Today, there is a chance for GBP to break below 1.3000, but given the deeply oversold conditions, any further decline is unlikely to reach the next support at 1.2960. Resistance is at 1.3045; a breach of 1.3070 would indicate that GBP is unlikely to weaken further.”
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Scotiabank also noted potential support near 1.30; “Additional support maybe found just below the level, given March/April congestion in the mid1.28s/1.30 area. We look to a near-term range bound between 1.30 and 1.31.”
ING takes a similar view; “GBP/USD has some decent support at 1.2950/3000.”
The US economy will remain a key near-term focus with markets also watching the US government shutdown amid some speculation that a deal to re-open was close.
US ADP data recorded an increase in private payrolls of 42,000 for October compared with consensus forecasts of around 32,000 and followed the revised 29,000 decline for September.
ADP chief economist Dr. Nela Richardson commented; “Private employers added jobs in October for the first time since July, but hiring was modest relative to what we reported earlier this year.” Meanwhile, pay growth has been largely flat for more than a year, indicating that shifts in supply and demand are balanced.”
Elsewhere, the ISM non-manufacturing index strengthened to 52.4 for October from 50.0 previously with a faster rate of price increases.
UK fundamentals will also be crucial with the BoE policy decision on Thursday while fiscal policy remains a key underlying element for the Pound.
According to Scotiabank; “Focus remains squarely centered on the UK’s fiscal situation and the likelihood of even greater fiscal shortfalls.”
MUFG noted some possible upside; “If the fiscal hole is smaller than expected, it is certainly feasible that the budget could then raise enough revenues to build a larger fiscal headroom while also avoiding a breach of the key election manifesto promises. It might therefore be that the negativity related to the budget pushing Gilt yields and the pound lower could become overdone.”
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TAGS: Pound Dollar Forecasts
