Pound to Dollar Week Ahead Forecast: 1.30 Today, 1.39 by June 2025 say Analysts

October 13, 2024 - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: 1.30 Today, 1.39 by June 2025 say Analysts

According to Commerzbank; “we expect pronounced USD weakness, as the Fed is now delivering much sharper interest rate cuts than previously expected. We therefore think that the arguments in favour of the pound versus the US dollar should count for much more, which is why we expect to see higher levels here in the coming months.”

Commerzbank does, however, expect renewed losses to 1.33 by the end of 2025 as the dollar recovers.

On a near-term view, UBS expects GBP/USD will test the 1.30 area, but is bullish on sterling over the medium term and forecasts gains to 1.38 by September 2025.

On a medium-term view, 1.40 remains a crucial resistance area for the Pound while the US election could cause a sharp shift in expectations and big dollar moves.

Nordea commented; “the uncertainty about the outcome is huge, with polls leaving the results too close to call, while the betting market favourite has changed many times in the past months.”

The near-term narrative was closer to the UBS scenario as GBP/USD dipped to 4-week lows at 1.3020 during the week as a firm dollar dominated.

Underlying Middle East tensions were also a significant factor during the week which helped underpin the US currency.

Goldman Sachs commented; “With reasons to be cautious on other safe-havens, we think the Dollar is the best expression for risk-off hedges.”

UK GDP data met consensus forecasts with 0.2% growth for August and markets remain convinced that the Bank of England will cut rates in November.

There was, however, a further net shift in Federal Reserve interest rate expectations during the week.

The latest US inflation data was slightly stronger than expected and a few Fed speakers also hinted that the central bank could decide not to cut rates in November.

Markets are now pricing in close to a 90% chance of a 25 basis-point cut next month with a 10% chance of no change.

Wells Fargo still expects moves in November and December; “The ongoing cooling in the labor market and lagging service sector components should help reduce core inflation a bit further in the months ahead.”

According to BNY Mellon, a rethink on Fed policy is important; “We note that our short-term dollar view has shifted as well. With Fed expectations now much less dovish than they had been until very recently, we no longer expect a gradual weakening of the currency, and instead see further upside.”

UBS expects a short rate-cutting cycle, limiting dollar losses; “Even though the Fed has only just cut rates, there are nascent signs that the easing of financial conditions earlier this year are having a positive effect on the housing market, with new home sales, housing starts and building permits all surprising to the upside of late.

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TAGS: Pound Dollar Forecasts