Outlook for the Pound vs US Dollar: "The GBP-USD may attempt to ride the vulnerable dollar higher" - But Longer-Term Forecasts at Barclays favour USD
The US Dollar is forecasted to drive the GBP-USD exchange rate lower in a second-phase of US Dollar strength warn analysts at Barclays. However, the near-term outlook favours GBP.
The key driver for the Pound / Dollar at present concerns the fading of monetary stimulus in the US.
The latest US nonfarm numbers introduced a further element of uncertainty with regards to the Fed taper, markets remain on the lookout for a taper announcement at this month’s FOMC.
A look at the markets on Monday morning shows the Pound Sterling to US Dollar exchange rate is 0.23 pct higher on a day-to=day basis; GBP/USD is currently quoted at 1.5665.
The US Dollar to Pound Sterling exchange rate is thus at 0.6383.
Be aware: The above quotes are taken from the wholesale spot markets. Your bank will likely affix a discretionary spread to the figures when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.
Potentially we could also expect market speculation to drift from a question of when to a debate on the shape and guise of the taper.
Barclays analyst Chris Walker says the second phase of US dollar strength would likely take in the British Pound.
In a weekly FX note Walker says:
"USD strength is likely to be split into two distinct stages. First, as bond risk premia increase (tapering of asset purchases are priced into other asset classes), higher-yielding currencies, particularly those with large external financing needs, will come under pressure versus the USD."
As such Walker says he is predicting the GBP to come under pressure against the US currency:
"After tapering is priced, rising rate expectations, driven by improvements in the labour market will see lower yielding, principally developed market, currencies weaken versus the USD. Our surprise index is in extreme positive territory, so the positive momentum which has driven GBP strength is likely to slow. Given crowded positioning in short-sterling contracts and recent price action, we would tactically look for some downside versus the USD."
Near-Term Outlook for Pound vs US Dollar
Concerning the shorter-term outlook for GBP-USD, Emmanuel Ng at OCBC Bank says a test of 1.57 is possible:
"The GBP-USD may attempt to ride the vulnerable dollar higher in the near term with the pair still hovering above the 1.5600 floor. On the CFTC front, net speculative GBP shorts increased in the latest week but note that this data pre-dated the BOE and the US labor market numbers last week, and a near term test towards the 1.5700 handle cannot be discounted.
"Meanwhile, sub-1.5600, the 200-day MA (1.5494) may be expected to provide a good floor on dips."
Elsewhere, we see analyst Gareth Berry at UBS says he is bullish on this currency pairing:
"The recent upside opens the doors to test the strong resistance range at 1.5718/50. Support is at 1.5522 ahead of 1.5423."