Pound to Dollar Rate (GBP/USD) Forecast to Ultimately Test 1.15

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We see the potential for further advances in the GBP to USD conversion but others are more bearish on the pair's prospects.

GBP/USD is seen trading at 1.3269 at the start of the new week - more or less where it ended the previous week.

The broad-based sell-off on global stock markets and decline in commodity prices has created a solid bid for the USD which tends to outperform as traders demand the safety of cash.

Driving the US Dollar higher and markets lower are the comments of several Fed officials who have suggested interest rates should be increased soon. 

A rise could come as early as the September meeting with markets now pricing in a 30% chance of a rise.

Higher interest rates would be positive for the dollar as they attract more inflows of foreign capital seeking higher yields.

The sell-off in global stock markets that continues into the new week is also considered to be USD supportive as in times of stress the default desire to hold cash usually benefits the world's most liquid currency.

The sell-off is also being blamed on the realisation that the Fed is indeed likely to raise rates which would typically be expected to cool the US, and global, economies.

The release of sup-par Manufacturing Production data in the UK and dovish commentary from Bank of England (BoE) Governor Carney, during his testimony to the Treasury Select Committee meanwhile, weighed on sterling, after the Manufacturing data showed a deeper-than-expected -0.8% contraction in August.

Nevertheless, purely from a technical/chart perspective, the outlook remains positive for the pound.

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