Pound Dollar exchange rate forecasted to hit 1.6; US FOMC dominates the outlook

• The Pound to US Dollar exchange rate is 0.36 pct higher at 1.5935 at 11:25.
• The US Dollar to Pound exchange rate is at 0.6275.

Please be aware that the above quotes are wholesale; your bank will charge a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please find out more here.

British Pound's at 4 month highs vs the US Dollar

Simon Eastman at Currency Index confirms that the British Pound remains the favourite in the GBP/USD pairing:

"Last week saw the pound continue its bullish stance across the board, making further gains against all the major pairings.

"The fact there was little data to trade off seemed to not matter as various releases from Europe and the States gave investors enough to go on to keep their confidence in the British pound, allowing fresh highs of 5 months against the euro and US dollar."

Forecast for the US Dollar vs Pound Sterling

We consider a couple of views from those whose job it is to forecast the direction of the currency markets.

Gareth Berry at UBS says:

"With the trending and momentum indicators pointing higher, potential is for more upside. Resistance is at 1.6027 ahead of 1.6179. Support is at 1.5777.

Emmanuel Ng at OCBC Bank says:

"Construction numbers also lent a hand to the GBP on Friday with the GBP-USD managing to lift above 1.5800 convincingly while the EUR-GBP finally sank below 0.8400. Going ahead, note that GBP-USD has broken above its recent monthly range on the back of supportive UK economic news flow with the next expected waypoint expected only at 1.6000 while some consolidation can be expected around the 1.5885 region.

Mazen Salhab at Swissquote Research says:

"The pair remains comfortably in the uptrend channel trend momentum indicators are flattening in bullish territory. We would buy on dips with our near term target at 1.5883 then 1.6000.

"Watch for next resistance to come into play at 1.5845 (12th Sept high), 1.5883 (1st Feb high), 1.6007 (18th Jan high)."

On the CFTC front, note that net speculative GBP shorts were also pared in the latest week.

Immediate outlook dominated by US FOMC meeting

The economic calendar this week is dominated by the US FOMC meeting on Wednesday.

"The Fed is widely expected to announce the start of a steady scaling back of its policy stimulus. While there remains significant uncertainty over the size of the tapering, from a market’s perspective, attention is likely to focus on any clues the Fed gives over its longer-term strategy for liquidity withdrawal," says Lloyds Bank Research.

This week, apart from the pivotal FOMC on Tue-Wed, RBA minutes are also scheduled for Tue, while the BOE is also due to release MPC minutes on Wed, and the SNB’s rate decision is also on Thu.

In Asia, the RBI is due to convene on Fri with markets looking for any further cues from the new RBI governor (note that the official GDP forecasts for 2013/14 were lowered last Friday).