The Pound-to-Dollar rate is on course for further gains this week, according to analysts at BMO Capital Markets, because the Bank of England (BoE) is in a bind that means it will have no choice other than to stick to its 'hawkish' interest rate guidance this week.
The U.S. Dollar may struggle to make further gains despite strong economic data including a consensus-busting GDP figure last Friday, according to analysts at Scotiabank, who say most of the ‘good news’ about the economy has already been priced into the greenback.
The Dollar is set to go on drawing support from a Federal Reserve interest rate that is highest in the developed world as the prohibitive cost of protecting investments against falls in the greenback is discouraging fund managers from betting against the U.S. currency, but those resulting 'unhedged flows' are a double-eged sword.
The Pound-to-Dollar rate is already sat on a healthy gain for the 2019 year but it could be in for a further boost this week if economists are right in warning suggesting the Bank of England (BoE) could feel compelled this week to begin preparing the market for a rate hike in the middle of summer.
The Pound-to-Dollar exchange rate has ceded the initiative to the bears in recent days, reinforcing the bearish short-term outlook and raising the distinct possibility of a continuation down to the next set of targets near the 1.27 February lows.
A global economic slowdown and the exorbitantly high cost of hedging against falls in the Dollar are likely to help keep the U.S. currency supported at relatively high levels over the coming months, ING Group says.