Pound to Dollar Rate: Goldman Sachs Stay Negative on Sterling Outlook

October 24, 2023 - Written by John Cameron

STORY LINK Pound to Dollar Rate: Goldman Sachs Stay Negative on Sterling Outlook

Foreign exchange analysts at Goldman Sachs maintain a negative stance on the Pound to Dollar (GBP/USD) exchange rate due to relative monetary policies and economic prospects.

At the time of writing, the Pound to Dollar exchange rate (GBPUSD) traded at 1.2273.

The bank considers that there will need to be a reversal in current trends to secure a sustained recovery in the Pound. It adds; “we would likely need to see a bigger shift from the BoE (more hawkish) or the Fed (more dovish) to change our bearish view on Cable. Therefore, we expect GBP/USD to continue to grind lower towards our 3-month forecast of 1.18.”

GBP/USD lost ground on Monday as equities came under renewed pressure, but there was support just below 1.2150 and the pair rallied to just above 1.2200 after the US open.

US Treasuries managed to rally from opening lows with the 10-year yield retreating to just below 4.90% after again hitting the 5.00% earlier in the session.

The decline in US yields was a key element underpinning GBP/USD as the dollar lost ground.

The Euro to Dollar (EUR/USD) exhcnage rate, for example, advanced to 10-day highs around 1.0630 and close to 4-week highs.


Goldman switched to a bearish Pound stance in September following the Bank of England move not to raise interest rates and it sees no reason to change its stance at this stage.

An important aspect is further evidence of weak economic data which will sap currency support.

According to the bank; “Even now at two big figures lower in GBP/USD, we see more room to run as the market remains asymmetrically responsive to softer incoming data.”

Goldman also notes that Sterling has failed to hold rallies which is indicative of an underlying lack of confidence.

ING does not expect support from data releases; “The UK calendar this week looks slightly sterling negative in that tomorrow's release of the services PMI might disappoint and we also might see some slight softening in the delayed jobs data.”

As far as the dollar is concerned, Goldman expects that the Federal Reserve will maintain a broadly hawkish stance with rates staying higher for longer.

Goldman expects that the tight Fed policy will continue to sap potential support for the UK currency.


It adds; “We expect such a backdrop for Sterling to persist, especially in Cable, as long as the FOMC remains relatively more open to additional hikes— even if not imminently.”

HSBC also expects that the Fed will maintain a firm overall monetary stance.

The US data releases will be important as a continuation of strong data would maintain pressure for a tight Fed policy as well as putting upward pressure on bond yields.

It adds; “Fed speakers have said yields are only an offset to a policy hike if they do not reflect expectations of higher growth. Given the continued strength in activity (consensus for Q3 GDP is 4.3%), this is questionable.”

HSBC expects protests against rate-cut expectations; “while the Fed may be comfortable that the market is priced for a “wait and see” policy for now, it may be less happy that a cut is priced in already by July 2024.”

A relatively tight Federal Reserve policy will tend to keep equity markets on the defensive.

Overall risk conditions also remain fragile, especially with on-going concerns surrounding the situation in the Middle East.

There have been significant losses in global equity markets with Asian bourses, for example, posting 1-year lows.

Wall Street indices have also been under pressure and the UK FTSE 100 index has hit 2-month lows.

ING commented; “The global financial environment can continue to be characterised as 'risk-averse' where both bonds and equities continue to sell off.”

It adds; “We do not like the look of the S&P 500 chart at all and note that any disappointment in mega-cap tech stock earnings this week could do quite a lot of damage to broader equity markets.

If equity markets remain firmly on the defensive, the Pound will also be vulnerable in global markets.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts