The Outlook for the Pound Sterling to US Dollar Exchange Rate (GBP/USD) this Week: A Bearish Week for the US Dollar?

The US Dollar (Currency:USD) is flat against the British Pound on Tuesday morning, however the monthly figures continue to show GBP retains a bullish bias:

• The Pound Sterling to US Dollar exchange rate is a percent higher than it was one month ago; 1 GBP converts into 1.5689 USD
• The US Dollar to Pound Sterling exchange rate is therefore at 0.6374. Try our live rate converter for up-to-the-second retail and wholesale rates.

Please also be aware that the above quotes are wholesale and your bank will affix a discretionary spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please find out more here.

Forecasters at RBS warn of GBP weakness

Today we hear from RBS who warn that the US Dollar is likely to advance against the British Pound into the end of this year.

"We believe there is a risk that business survey data are exaggerating the pace of recovery and that consumer spending will fail to maintain the recent pace of recovery given weak real income growth," says Paul Robson at RBS. See these forecasts here.

Short-term advantage remains with Sterling

While RBS takes a longer-term view short term forecasts suggest the GBP is the horse to back.

Emmanuel Ng at OCBC Bank says he is biased towards more Pound Sterling upside:

"The GBP-USD may still remain biased higher in the near term given the weakened state of the broad dollar 9watch UK labor market numbers on Wed for domestic influences) with initial resistance levels expected towards the 1.5730-1.5780 neighborhood while key support is expected towards the 200-day MA (1.5492)."

Kathy Lien at BK Asset Management says this week is unlikely to be favourable to the US Dollar:

"Reduced expectations for Fed tapering could also lead to the adjustments of long dollar positions. While we believe that the central bank could take advantage of the decline in yields and make a symbolical change in asset purchases, the outcome of their decision should be negative for the dollar and positive for bonds.

"Friday's non-farm payrolls report puts the chance of Fed tapering in September versus December at 50-50 but even if monetary policy is changed this month, the move would be downplayed by a dovish FOMC statement.  This week's retail sales report is not expected to provide much help to the greenback - consumer spending should have increased in the month of August, but the momentum in spending will be weak."

BUT WAIT: Speculators are Topping up on the US Dollar

However, the latest speculative data on positioning the foreign exchange markets, as expressed in the latest IMM Commitment of Traders report, shows that investors have increasingly geared up for a return to form for the US Dollar.

"Net implied USD longs bounced to 40% of open interest from 32% the week before, in line with the fight back in the broad dollar index and sell-off in US treasuries," says Oliver Harvey at Deutsche Bank.

The TFF report showed that hedge funds have increased their dollar exposure versus euro significantly over the past week.

Net implied EUR long positions fell to 9% of open interest versus 16% the week before.

Asset managers also extended their EUR short positions slightly. Shorts were added to in GBP, CAD, AUD and NZD with hedge fund positioning explaining most of the moves.

Speculative investors are now flat MXN (versus a long position of 38% open interest observed two weeks back), driven by leveraged funds who have added further to short positions.