– Written by
David Woodsmith
STORY LINK Pound to Dollar Forecast: USD Slides as GBP Targets 1.35
The Pound to Dollar exchange rate (GBP/USD) climbed to six-week highs near 1.3450 as a sharp fall in oil prices and lower US Treasury yields undermined Dollar demand.
Pound Sterling also benefited from expectations of a Bank of England rate hike this week, while investors remain alert to the US midterm elections and the risk of further weakness in technology shares.
GBP/USD Forecasts: 6-Week Highs
The Pound held relatively firm on Monday while a slide in energy prices sapped dollar support, especially with a steadier tone in risk appetite. In this environment, the Pound to Dollar (GBP/USD) exchange rate advanced to 6-week highs near 1.3450 before settling around 1.3425.
US yields moved lower which undermined the dollar with the currency index dipping to 101.35. Scotiabank sees the potential for further losses; “The risks for the USD are firmly tilted to the downside as our FV estimate based on weighted 2Y yield spreads reflect a continued erosion of fundamental support. Our FV [fair value] estimate for the DXY is now just below 100.”
Kit Juckes, head of FX strategy at Societe Generale commented; “Risk is more on, the oil price is down and so it’s slightly more risk-friendly, slightly more dollar negative.”
US equity markets held limited gains on Monday after sharp losses in the tech sector last week and MUFG noted the importance of US developments; “Market participants will be watching closely to see if the US A-related sell-off extends further in the week ahead. A deeper correction poses downside risks for the US dollar.”
Save on Your GBP/USD Transfer
Get better rates and lower fees on your next international money transfer.
Compare TorFX with top UK banks in seconds and see how much you could save.
Scotiabank sees scope for further GBP/USD gains; “The strong rebound from the mid-October low which formed a bullish weekly reversal remains the salient feature of the charts and, with moderately bullish short-term trend momentum signals, keeps focus on scope for gains. Resistance is 1.3470 and 1.3550 ahead of a return to the August peak at 1.3676.”
Domestically, markets remain very confident that the Bank of England will raise interest rates on Thursday which would reinforce the Pound’s high-yield status.
US oil prices slumped over 6% amid fresh hopes that there could be some progress in negotiations between the US and Iran.
MUFG noted the potential dollar impact; “The building risk of a bigger and more protracted energy price shock has been contributing towards a stronger US dollar in recent months.”
The US mid-term elections will be held on November 3rd.
ING commented; “Betting websites give the Democrats a 70-72% chance of taking both the House and the Senate. One could make the case that the dollar should come lower on such an outcome, since it would likely lead to gridlock on the debt ceiling, a prolonged government shutdown next year and could encourage President Trump to pursue an even more activist foreign policy agenda.”
MUFG added; “A damaging defeat for the Republicans could put a dampener on US dollar strength but we don’t expect it to be a game changer on its own.”
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Dollar Forecasts
