April 23, 2025 – Written by Frank Davies
STORY LINK Pound to Dollar FX Forecast: Sterling “Near-term Consolidation Around 1.33”
The US dollar secured net gains on Wednesday with support from a second successive surge in equities during the day.
The gains in equities and dollar were driven by another U-turn from President Trump as he stated that he was not looking to dismiss Fed Chair Powell. There was also an upbeat Administration assessment of trade prospects.
The latest US business confidence data also suggested more resilience than expected which provided an element of relief surrounding the US outlook.
The Pound to Dollar (GBP/USD) exchange rate posted sharp losses to below 1.3250 before a recovery to near 1.3300.
According to Scotiabank; “We look for near-term consolidation around 1.33 and note the fact that GBPUSD’s most recent highs were not confirmed by the RSI, offering negative divergence in momentum. We look to near-term support between 1.3220 and 1.3250 and resistance between 1.3400 and 1.3420.”
MUFG is not expecting an extended recovery; “The scale of the US dollar move does point to some scope if these reports of de-escalation intensify that we could see this US dollar rebound extend further. Still, investors are likely to remain cautious and in many ways, damage is already done that likely means any US dollar recovery will be brief and relatively modest.”
According to Scotiabank; “Relief for the USD may be temporary as trade uncertainty will continue to shade US economic prospects.”
The US PMI manufacturing index improved to a 2-month high of 50.7 for April from 50.2 previously and above consensus forecasts of 49.0.
The services sector index did retreat to a 2-month low of 51.4 for the month from 54.4 and compared with expectations of 52.8.
The PMI composite index did decline to a 16-month low for the month as business confidence dipped again to the lowest level since July 2022.
Prices charged for goods and services rose at the sharpest rate for 13 months.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented; “The early flash PMI data for April point to a marked slowing of business activity growth at the start of the second quarter, accompanied by a slump in optimism about the outlook. At the same time, price pressures intensified, creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise.
Markets are pricing in a 65% chance of a June rate cut after no change in May.
Earlier, the UK PMI manufacturing index retreated further to a 32-month low of 44.0 for April from 44.9 previously and in line with consensus forecasts while the services-sector index retreated sharply to a 27-month low 48.9 from 52.5 and well below expectations of 51.5.
The composite output index dipped to a 29-month low in contraction territory.
Business confidence data dipped to the lowest level since October 2022 while employment declined further.
Costs increased at the fastest rate since February 2023 while output charges increased at the fastest rate for close to two years which will make Bank of England decision making notably difficult.
MUFG expressed reservations over the outlook; “The market may be reluctant to take kind of a strong view at this point in terms of how that’s likely to impact the UK economy and pound. But certainly, if you look at the (PMI) figures today it does show that business confidence did drop more sharply than expected in April, so that certainly increases the risk of the UK economy slowing down more in the second quarter.”
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TAGS: Pound Dollar Forecasts
