Pound to Dollar Forecast: GBP Struggles at Resistance, USD Awaits Huge FED Risk
– Written by
Frank Davies
STORY LINK Pound to Dollar Forecast: GBP Struggles at Resistance, USD Awaits Huge FED Risk
The Pound to Dollar (GBP/USD) exchange rate stalled below key resistance at 1.3590 on Friday after UK GDP data showed zero growth in July.
Sterling briefly touched 1.3580 in Asia but retreated towards 1.3550, with flat domestic growth and weak manufacturing tempering gains.
Dollar sentiment remains fragile after a sharp rise in US jobless claims, while markets are almost fully pricing a Fed rate cut next week against steady Bank of England policy.
GBP/USD Forecasts: Advance Stalls at Key Resistance
The Pound to Dollar (GBP/USD) exchange rate hit highs just above 1.3580 in Asia on Friday before a limited retreat to test support below 1.3550.
The immediate focus will still be on the key resistance area at 1.3590/1.3600.
Traders remain convinced that the Fed will cut interest rates next week with no change from the Bank of England while the wider economic debate continues.
Save on Your GBP/USD Transfer
Get better rates and lower fees on your next international money transfer.
Compare TorFX with top UK banks in seconds and see how much you could save.
Scotiabank notes that any break higher could trigger gains towards 1.38.
UoB commented; “A break above this level is not ruled out, but based on the current momentum, GBP is unlikely to be able to maintain a foothold above this level.”
The dollar was undermined on Thursday by a jump in US jobless claims which triggered fresh concerns over the labour market.
The ONS reported that UK GDP was unchanged in July after0.4% growth for June, in line with consensus forecasts.
The services sector recorded marginal growth for the month, but this was offset by a 0.9% retreat in industrial production.
Manufacturing output dipped to the lowest level since January with significant weakness in pharmaceuticals.
Deutsche Bank chief UK economist Sanjay Raja noted difficulties associated with tariffs; “as the US trade war catches up with the UK, global headwinds will gather pace, weakening the UK’s external backdrop”.
PwC chief economist Barret Kupelian added “Looking ahead, we may see a replay of last autumn’s script: private-sector firms paring back spending in the run-up to the Autumn Budget, creating a headwind for headline growth into year-end. This isn’t a cliff edge, but it is a gear change, at least for now.”
The latest Bank of England inflation expectations survey recorded an increase in long-term expectations to 3.8% from 3.6% in the May survey, the highest reading since 2019.
The combination of subdued growth and inflation concerns will trigger further difficulties for the Bank of England.
There are strong expectations that the Bank of England will leave rates on hold at 4.00% at next Thursday’s policy meeting.
ING commented; “September’s meeting almost certainly won’t result in another rate cut, with policymakers instead poised to keep rates at 4% on 18 September. But the prospect of a November cut hangs in the balance, and this meeting will be heavily scrutinised for hints on whether officials are still considering further easing this year.”
There are very strong expectations of a Fed rate cut next week with traders pricing in over a 90% chance of a 25 basis-point cut.
According to Danske Bank; “Markets have flirted with the idea of the Fed delivering a larger 50bp cut at the September meeting after disappointing jobs growth over the summer, but we still think a more gradual approach is better suited for the current environment.”
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Dollar Forecasts
