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    Revised forecast-2015: British pound

    My projections for the British pound against the US dollar dynamics this year, which I’ve made on March 17, were quite pessimistic. I assumed that the Bank of England’s desire to preserve ultra-soft monetary policy would lead to a fall of the GBP/USD pair to around $ 1.42 per pound by the end of the third quarter.

    So far, British macroeconomic reports confirm the assumption that the UK central bank can take its time not to rush with the interest rate hike.

    GDP growth in the first quarter slowed from 3.0% to 2.4% on the annual basis, while forecasts expected 2.6% y/y. Perhaps, it indicates that the highest point of the current business cycle in the UK economy is now behind. As for industrial production, Markit PMI suggests, that business activity in this sector has already reached its peak levels in 2013, and there is no certainty that the negative trend of this indicator is over.

    Of course, the UK economy’s growth rate is still in the leading position among the developed countries. However, downside risks create a situation where the Bank of England, given the weakness of inflation, may not rush to launch another tightening cycle until the next year. As for the US Federal Reserve, On the other hand, I still expect a rate hike later this year, in the second half.

    I think that in these conditions the GBP / USD pair can even refresh its lows this year, and although the decline will not be as large-scale as I expected a month and a half ago, and will be most likely limited by the lower boundary of the 2009-2015 channel (see. The Chart), that is, around $ 1.44 per pound. Reaching this mark will be a good opportunity to open long-term long positions in the British currency, assuming its future retracement to the upper boundary of the above-mentioned channel.

    GBPUSDMonthly6-5-15

    As for the EUR / GBP pair, my expectations haven’t changed substantially: I still project, that by the end of the year it will be traded in the 0.72-0.7250 range.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    My projections for the British pound against the US dollar dynamics this year, which I’ve made on March 17, were quite pessimistic. I assumed that the Bank of England’s desire to preserve ultra-soft monetary policy would lead to a fall of the GBP/USD pair to around $ 1.42 per pound by the end of the third quarter.

    So far, British macroeconomic reports confirm the assumption that the UK central bank can take its time not to rush with the interest rate hike.

    GDP growth in the first quarter slowed from 3.0% to 2.4% on the annual basis, while forecasts expected 2.6% y/y. Perhaps, it indicates that the highest point of the current business cycle in the UK economy is now behind. As for industrial production, Markit PMI suggests, that business activity in this sector has already reached its peak levels in 2013, and there is no certainty that the negative trend of this indicator is over.

    Of course, the UK economy’s growth rate is still in the leading position among the developed countries. However, downside risks create a situation where the Bank of England, given the weakness of inflation, may not rush to launch another tightening cycle until the next year. As for the US Federal Reserve, On the other hand, I still expect a rate hike later this year, in the second half.

    I think that in these conditions the GBP / USD pair can even refresh its lows this year, and although the decline will not be as large-scale as I expected a month and a half ago, and will be most likely limited by the lower boundary of the 2009-2015 channel (see. The Chart), that is, around $ 1.44 per pound. Reaching this mark will be a good opportunity to open long-term long positions in the British currency, assuming its future retracement to the upper boundary of the above-mentioned channel.

    GBPUSDMonthly6-5-15

    As for the EUR / GBP pair, my expectations haven’t changed substantially: I still project, that by the end of the year it will be traded in the 0.72-0.7250 range.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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