GBP USD Forecast: Analysts Suggest Pound to Dollar Exchange Rate Is Overbought; Fall Predicted For The Pair

April 29, 2014 - Written by David Woodsmith

STORY LINK GBP USD Forecast: Analysts Suggest Pound to Dollar Exchange Rate Is Overbought; Fall Predicted For The Pair

The Pound Sterling (currency:GBP) has come a long way in a relatively short space of time, leading many analysts to suggest that it is now overbought against a basket of the sixteen most-actively traded global currencies. Taking the Pound Dollar exchange rate GBP/USD as a benchmark, the evidence for this looks compelling. The Pound Sterling to Dollar exchange rate was struggling below the 1.5000 GBP/USD threshold less than a year ago – the pair touched 1.4814 GBP/USD during the second week of July 2013 as market whispers abounded regarding the potential for a triple dip in UK economic activity.

The Pound Sterling to US Dollar exchange rate is trading down -0.03% at 1.68034 GBP/USD as of 12:00 Tuesday 29th April 2014.

However, GBP USD has shot forward during the intervening period, coming close to the 1.7000 level last week, partly because the real economy has improved. The move has also partly been driven by the fact that the Bank of England’s new Governor Mark Carney, who took over from Mervyn King at the start of July 2013, has proved to be very far from the arch-Dove which many analysts had been expecting him to be.

Most economists had been banking on Carney to expand the Bank of England’s controversial Quantitative Easing programme when he took over – his failure to do so proved to be highly supportive to the Pound. However, Carney’s comments of recent sessions suggesting that a UK interest rate rise might be a long way off yet, mean that the Pound’s strong gains of the past nine months may now be nearing an end. Several leading analysts are now suggesting the GBP USD may end the year back in the middle part of the 1.5000 – 1.6000 trading range.

This morning’s advance version of the UK’s Q1 Gross Domestic Product data will provide investors holding Sterling with further insight regarding the likely future direction for the Pound. Some analysts are suggesting that the slightly dovish bent of Carney’s recent statements may be driven by an advanced viewing of today’s numbers. With expectations of a year-on-year showing of 3.2%, the Pound could be set for a fall.

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