Pound-to-Dollar Rate Can Rise Further say Analysts, but Beware of Misplaced Hope!

The Pound is one of the best performing currencies this January and can still rise further against the Dollar over the coming days and weeks, according to some analysts, but others say the market is in danger of getting ahead of itself. 

The Dollar could be due a boost before the week is finished should the U.S. senate vote through either of the two proposals due before them aimed at ending the ongoing government shutdown.

The U.S. government shutdown is acting as a weight around the ankles of the economy and with no end in sight this Monday, it could soon begin to impact the Federal Reserve (Fed) policy outlook and weigh on the Dollar, according to CIBC Capital Markets. 

The technical outlook for the Pound against the U.S. Dollar is positive, however we are wary that the coming week will be packed with political intrigue that could well shake Sterling.

"The Dollar is still the best of a bad bunch.... You can say lots of horrible things about the U.S. but you can say even worse things about others, and that puts me in a strong-Dollar camp.” - David Bloom, HSBC.

The Dollar index is approaching an inflection point that will mark a key make-or-break moment for the U.S. currency, according to technical analysts at Bank of America Merrill Lynch, who say the short-term trend for the greenback remains downward.

The Pound is positively aligned against the Dollar from a technical perspective and could climb higher, but we are wary of the implications of this week's Brexit vote for Pound Sterling.

The Dollar slumped Friday following the latest commentary from Federal Reserve (Fed) policymakers and after inflation data voiced support for the bank's new narrative that it can afford to be "patient" before hiking U.S. interest rates again.