GBP/USD briefly dropped below the 1.20 level earlier this week. Economists at Rabobank expect the pair to see further dips below 1.20 in the coming months.
EUR/GBP seen at 0.90 around the middle of the year
“We expect to see further dips below GBP/USD 1.20 in the coming months.”
“While EUR/GBP has dropped back from its recent highs, it remains in an ascending channel, and we retain our forecast for a move to 0.90 around the middle of the year.”
“On March 15, Chancellor Hunt is due to present his spring budget. Hunt has provided reassurances to the market that he will not be pulling any rabbits from the hat next month, given the need to reduce inflation. This may avoid any crisis for the gilt market, but it suggests the potential for little change in the prevailing economic gloom. This is likely to leave GBP on the back foot.”
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Rabobank, the Netherlands-based international financial services provider, recently released a forecast that the British Pound to US Dollar exchange rate (GBP/USD) is expected to decline further below 1.20 over the coming months.
The GBP/USD rate has recently been on an upward trajectory, however, this outlook suggests that this could all come to an end in the near future. Rabobank analysts expect the Bank of England’s more cautious stance on interest rates to counter the potential boost to GBP/USD by the prospects of a post-Brexit trade agreement between the UK and EU.
Furthermore, the looming second wave of coronavirus is likely to lead to further damage to the global economy and the already weak Pound will suffer.
Additionally, Rabobank analysts have identified another key point of pressure on the rate. If the US presidential election results in a Democratic victory, then this could lead to further weakening in the dollar, as the Democratic party tends to favour expansive fiscal policies and higher levels of taxation which have historically weakened the dollar.
Finally, a lack of confidence in either Brexit or US fiscal policies would lead to additional risk-off sentiment, potentially leading to a further decline in GBP/USD.
All these factors suggest that based on current trends and the outlook of Rabobank, the British Pound to US Dollar exchange rate could drift lower over the next few months, potentially reaching lows not seen since October.
