April 16, 2025 – Written by David Woodsmith
STORY LINK Pound to Dollar Forecast: Scope for GBP/USD Gains to 1.3290 say UoB
Market fear has eased considerably over the past 24 hours with gains in US equities and bonds.
The FTSE 100 index traded 0.9% higher in early trading, maintaining the recovery from last week’s slide.
Deutsche Bank commented; “Whilst equities were recovering, arguably a bigger relief for investors was the recovery in the bond market, which eased fears about some sort of serious financial turmoil developing.”
The Pound remains correlated strongly with global risk conditions and the currency gained important support from a rebound in asset prices.
Dovish Fed rhetoric also hampered the dollar in global markets.
The Pound to Dollar (GBP/USD) exchange rate surged to 6-month highs around 1.3240 and Sterling also posted net gains on the crosses.
UoB sees scope for further GBP/USD gains to 1.3290.
ING sees a bias for EUR/USD to strengthen to 1.15 and, if this scenario plays out, GBP/USD is likely to extend gains.
There is still an important element of caution surrounding the implications of US trade policies.
According to MUFG; “While we are seeing carve-outs emerge from Trump’s trade policy there is unlikely to be any let-up over the coming weeks/months. The next dangerous stage for the financial markets will be getting confirmation of the damage being done to the real economy from the tariff hit and the uncertainty.”
The latest UK labour-market data was mixed. The number of people on payrolls declined 8,000 for February and there was a provisional 78,000 slide for March.
Vacancies declined for the 33rd successive month and dipped below pre-pandemic levels.
The annual increase in headline wages growth increased marginally to 5.9% from a revised 5.8% previously while underlying growth was unchanged at 5.6%, further evidence of sticky wages increases.
According to ING; “The latest one-month and three-month changes in private-sector pay show that the pressure isn’t really abating. The latest rise in the National Living Wage will also keep pay growth supported through the spring.”
Pantheon Macroeconomics chief UK economist Rob Wood commented; “we would treat the initial estimate of payrolls with a large bucket of salt because the 78,000 month-to-month fall will get raised markedly in next month’s figures to around no change if revisions continue to follow the pattern of the past couple of years.
Nevertheless, he added; “There is enough here for the MPC to cut interest rates in May and to signal further reductions ahead. Accordingly, rate setters will likely sound a little more dovish at their May meeting, especially after the economic and market ructions following President Trump’s tariff hikes.”
ING also remains confident that there will be a May BoE rate cut.
Any potential negative Pound impact from BoE rate cuts would be offset if US rates decline.
There were dovish comments from Fed Governor Waller on Tuesday. If there is notable disruption from tariffs he noted; “With a rapidly slowing economy, even if inflation is running well above 2%, I expect the risk of recession would outweigh the risk of escalating inflation, especially if the effects of tariffs in raising inflation are expected to be short lived.”
He implied that the Fed will look through higher inflation and markets are expecting at least three rate cuts this year.
MUFG commented; “This kind of scenario points to a potential notable further decline in real yields, possibly into negative territory, at the front-end of the curve which is an unfavourable development for the dollar.”
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TAGS: Currency Predictions Pound Dollar Forecasts
