Pound to Dollar Week Ahead Forecast: Ranges 1.25-1.137 in Nine Months

February 25, 2024 – Written by Frank Davies


Bank of America analysts expect the Pound to Dollar exchange rate (GBP/USD) to strengthen to 1.37 at the end of 2024.

Credit Agricole sees scope for near-term Pound backing, but expects that GBP/USD will retreat to 1.25 at the end of the year.

The main focus was on bond and equity markets during the week. There were strong gains on Wall Street with the S&P 500 index posting a fresh record high on the back of a further surge in Nvidia.

The Pound was able to benefit from equity-market gains and firm risk appetite, although gains were held to around 1.2675 after failing to hold 1.2700.

According to Credit Agricole; “Provided that global market conditions remain supportive, the GBP should remain an attractive investment currency for FX carry trades funded in CHF and JPY in the near term.”

The Pound will, however, be vulnerable if market conditions trigger a reversal in carry trades.

The UK PMI business confidence data was little changed for February with further expansion in the services sector while there were stronger inflation pressures for the month.


HSBC maintains a measured positive stance on the UK economy; “It provides further evidence that the UK economy’s recession should be shallow and short-lived, supported by the strength in services. GBP may also have been helped by the rise in the composite input and output price components.

Bank of England (BoE) officials have continued to push back against the possibility of an early rate cut, but Governor Bailey did consider that a reduction in rates was realistic this year.

Nomura commented; “We are more comfortable with our view of an August BoE cut – this had been a hawkish call that the BoE would wait so long, but we wonder how long it might be before markets think we’re too dovish (or even price August out altogether and delay cuts for longer).”

Bank of America considers that markets are underestimating the UK and Pound potential; “Though US growth has been stronger for longer versus the UK, the nuance here is that expectations around UK macro have been very low. With the domestic economy continuing to improve, the pessimistic read on UK growth is harder to reconcile. We find ourselves on the optimistic side of the consensus.”

UK fiscal policy will be a significant focus in the short term with the budget on March 6th.

The UK recorded a strong budget surplus for January with the seasonal inflow of tax receipts while spending on debt interest and energy subsidies was much lower than the previous year.

According to Kathleen Brooks, research director XTB; “Economic growth is still likely to remain sluggish, however, the question about tax cuts is now getting interesting.”

Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets pointed to underlying fiscal vulnerability; “despite a surge of tax revenues that the January surplus undershot median expectations suggests the scale of potential fiscal expansion could be smaller than some had hoped”.

Westpac still sees UK data as crucial; “GBP/USD has weathered sustained tests of a broad support band, between 1.2450-1.2600, but remains vulnerable. How data unfold will be key to determining whether 1.2450 will be tested or whether a base has formed, allowing for another run towards 1.30.”

The US business confidence data was mixed during the week while the labour-market evidence remained strong.

Trader confidence in an early Fed interest rate cut has continued to decline.

Markets are now pricing in less than a 25% chance that rates will be cut at the May meeting.

According to Westpac; “There’s a non-negligible chance some 2024 rate cut dots could drift higher at the 20 March FOMC, with activity data since the Dec FOMC mostly impressing, while Jan inflation data dented the benign disinflation narrative.”

Treasuries also lost ground with the 10-year yield close to 3-month highs.

Investment banks are starting to focus on the November US Presidential election.

Nordea commented; “The outcome of the US presidential election could see the USD standing on a firmer footing than we have pencilled in. If Trump is re-elected, his comeback will likely lead to more inflationary policies, a renewed trade war between the US and abroad with China in focus, heightened geopolitical risks and higher US government deficits.”

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