Pound to Dollar Week Ahead Forecast: No Breakout yet

March 3, 2024 – Written by Tim Boyer


Currency exchange analysts at MUFG and ING both expect that the Pound to Dollar exchange rate (GBP/USD) will trade just above 1.30 at the end of 2024 as the dollar loses ground.

HSBC, however, expects GBP/USD to lose ground during the year.

GBP/USD was unchanged on the week close to 1.2650.

According to ING; “Continued investor interest in the carry trade should keep Sterling reasonably well bid. And given our medium-term fair value calculations that GBP/USD is some 7% undervalued and that the Dollar will roll lower later this year, we remain happy with a 12-month target at just over 1.3000.”

The UK macroeconomic debate will be very live over the next few weeks, starting with the UK budget which will be released on March 6th. The Bank of England interest rate debate will also continue to be intense.

Limited tax cuts are expected to be announced by Chancellor Hunt.

MUFG emphasises that the Bank of England will be taking note; “While the size of the potential fiscal giveaway is unlikely to be sufficient to significantly alter the performance of the UK economy, it could discourage the BoE from delivering an earlier rate cut in May or June.”


Bank of America (BofA) expects that the budget will be a net positive for the Pound and added; “April seasonality is once again approaching and the evidence remains supportive for GBP outperformance. Thirdly, the increase in the Minimum Wage in April will add support to the UK consumer. All-in-all, a lot of positive headwinds for the UK economy where pricing remains for a June rate cut versus BofA’s August call.”

Rabobank considers that there will be a notable element of restraint and that fiscal policy will not be a principal driver this year. Assuming that fiscal prudence is maintained, it is therefore possible that neither the budget nor the election will hold much capacity to shock the pound this year.”

US inflation and Federal Reserve policies will be extremely important for the Pound, especially as there will be a key influence on global risk conditions.

Markets are still digesting the inflation data released in February and the PCE prices index, a key Fed measure of inflation, increased 0.4% for January with a 2.8% annual increase.

Other US data was mixed for the week with an increase in jobless claims and contrasting manufacturing reports.

According to Rabobank; “US data releases over the next few months should reveal whether the current stickiness in US inflation is temporary, a seasonal issue, or whether it is persistent in nature. This will be key in determining whether this year’s broad-based USD rally still has legs.”

The bank added; “We see scope for more broad-based USD strength over the spring as the market continues to recalibrate the pace and timing of policy moves in the G10.”

HSBC discusses Fed policy; “One angle garnering more attention is whether even the Fed has been too dovish in its expectation for 2024, and whether a late-cycle tightening could be in prospect. For now, the messaging from the Fed is clear – a further rate hike is unlikely but there is also no rush to cut.

At this stage, Fed members are continuing preaching caution and the need for patience before cutting interest rates.

HSBC also notes that there has been some evidence of vulnerability in the consumer-orientated US data; “After a long stretch higher, reflecting activity data which has most often come in above consensus expectations, the index has shown recent signs of turning lower.”

It added; “On balance, it suggests that while US economic performance may support the USD, further USD gains built on upside surprises may be harder to come by.”

Commerzbank considers that there will need to be a catalyst for dollar selling; “Now that the market and the Fed seem to be on the same page, one thing should be clear: until we see data that suggests cracks in the Fed’s current story, the Dollar is unlikely to fall significantly again. As a result, it is likely to remain difficult for market participants betting on a weaker US Dollar.”

Bank of America looks at the US budget debate. The US Congress has passed spending resolutions to avert an immediate shutdown, but further action is needed by the end of next week.

A 1% across the board spending cut would kick in on April 30 if no spending deal is reached, damaging the economy.

BoA added; “We expect Congress to pass a continuing resolution and avert a shutdown. If it fails to do so, we think a brief shutdown cannot be ruled out, but a long one looks unlikely in an election year.”

From a longer-term perspective, MUFG frets over US policy; “So while the US has clear advantages, it also has a big problem ahead – tackling unsustainable budget deficits that ultimately point to potentially higher levels of inflation, weaker GDP growth and a weaker US dollar.

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