GBP/USD forecast - page 23

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Key levels to watch for:
Support: 1.1105; 1.1045; 1.0955;
Resistance: 1.1280; 1.1355.
 

BoE's Saunders Helps British Pound Tumble Against Rampant US Dollar and Euro


Pound Sterling retains a heavy tone against the EUR and USD as a Bank of England policy maker warns that interest rates are unlikely to be raised even in the event of inflation breaching its 2% target in 2017.

  • The Pound to Euro exchange rate today: 1.1067
  • Euro to Pound Sterling exchange rate today: 0.9037
  • Pound to Dollar exchange rate today: 1.2240

Fresh downside impetus, as if Sterling needed more, was today supplied by the Bank of England's Michael Saunders who told UK parliamentarians that the Bank will likely resist raising interest rates even in the event of rocketing inflation.

Typically rising interest rates result in currency appreciation and the news that UK rates will remain lower for longer have hurt Sterling.

Saunders expects inflation to rise to 2% in 2017 and to 2%-3% in the following year.

While this is above the Bank of England’s 2% target, Saunders believes it wrong to raise interest rates if that inflation is being driven by import prices.

He also expects further GBP declines.

“Given the scale and persistence of the UK’s current account deficit, I would not be surprised if sterling falls further, but I am fairly agnostic as to whether any further depreciation is likely,” Saunders told the Treasury Select Committee.

Saunders believes Sterling was overvalued before the referendum, as the currency was strong despite Britain’s persistent current account deficit. As a result, there are some benefits to the fall in the Pound.

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This is getting crazier and and crazier every day. Trading GBP these days is sucide
 

Has Sterling Hit Its Breaking Point?


Something has changed with sterling. It is not just last week's flash crash that seems now to be more of a mark down than fat-finger, liquidity or micro-market structure explanation that has been written about in the press. Surely claims that sterling's dramatic slide was due to comments by the otherwise inept French President, which did not go beyond the stern message sent by Germany's beleaguered Chancellor a few days earlier seem a stretch.

At first, sterling's depreciation was understood as beneficial for the UK following the decision to leave the EU. The decline of sterling alongside the easing of monetary policy and the decline in long-term interest rates was a wholesome development. With a lag, it could serve as a cushion for the economy. Nearly every survey and press report have consistently warned that the UK's membership in the EU, and access to the single market, is an important factor on location, investment and employment decisions by businesses.

However, more recently, sterling's continued decline has not coincided with lower gilt yields. The benchmark 10-year Gilt yield has risen 22 bp over the past week. It is true that interest rates broadly have risen, but nothing like the UK has experienced. The US 10-year Treasury yield has risen eight basis point in the same period. The 10-year German Bund yield has risen seven basis points. After the UK, Canada has seen the second-biggest increase in its 10-year yield, which has risen 12 bp.

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Pound to Dollar Forecast: Another Leg Lower Still to Come say Goldman Sachs


GBP/USD could consolidate further but the final leg lower of the longer-term sell-off is yet to come warn Goldman Sachs.

GBP/USD reains under pressure having fallen for six consecutive days now.

The UK currency is left looking deeply oversold and is due some counter-trend corrective price action according to technical analysts at Goldman Sachs who have updated clients with their latest projections.

We thought the mid-week bounce would be the start of that correction but we might have to wait a little longer.

GBP/USD is noted by Goldman Sachs to be in the third and final ‘c’ wave of a large multi-year correction, which once completed, will lead to a new impulse wave higher.

The final c-wave of the correction began at the June 2014 high (see chart below) and has completed three waves down, but is expected to complete five in total:

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Barclays looking for GBP/USD to 1.10 by end 2017


Barclays on GBP, they are looking for further weakness

(Bolding mine)
GBP remains vulnerable to the downside despite the prospect of more parliamentary scrutiny
  • It is notable that a weaker currency is being viewed as a largely positive development by policymakers
  • In a break from tradition, the government has suggested GBP's depreciation is helpful
Forecasts:
  • We continue to forecast GBP-USD at 1.20 at the end of 2016
  • 1.10 at the end of 2017
The Barclays note elaborates with more on the politics of the whole thing ... in brief (and this will not be news if you've been following our two Brexiteers in the UK):
  • UK parliament may have some oversight of the Article 50 process
  • A "full and transparent debate on the government's plan for leaving the EU" and Parliamentary scrutiny of the plan
  • Debate vote is non-binding
  • One-third of UK lawmakers who previously supported "Remain" would now vote to trigger the Brexit process, according to a poll yesterday by Reuters ... this poll suggests many would respect the referendum result whatever their personal political preference. 
  • UK court hearing a legal challenge tomorrow that parliament should be allowed to vote on triggering Article 50
 
Pound is artificially held above 1.2. When it breaks that level that will be like a rock falling
 
Forecasts bellow 1.2. That will be something
 
Bearish on the Sterling. 
 

The British Pound To Dollar Weekly Forecast - Potential For GBP USD Exchange Rate Recovery?

The Pound US Dollar (GBP USD) exchange rate trailed lower last week as ‘hard Brexit’ concerns took hold of GBP movement while the Dollar rallied on Fed rate hike bets.

  • The British Pound to Dollar exchange rate today (16/10/16): -0.31pct at 1.21526.
  • The US Dollar to Pound exchange rate today: +0.31% at 0.82287.

GBP/USD lost around two cents in value last week, tumbling from the week’s opening level of 1.2435 and eventually fluctuating near the key level of 1.22.

The pair briefly hit a new 31-year-low of 1.2109 on Tuesday night, but was able to hold above those lows for the remainder of the week.

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