Pound to US dollar forecast – Will GBP/USD levels drop below 1.30?

The US launch a significant stimulus package to stem the economic impact of the Coronavirus pandemic

Pound to US dollar exchange rates have been nudging the 1.30 level with a real prospect of it dipping below this important handle. There is also a growing expectation that we could see the pound losing value in the absence of any fresh news to support it. Brexit uncertainties persist and could easily see the pound lose ground as investors become wary of a deterioration ahead.

The US dollar ha also lost ground overnight, following news that Chinese GDP was now better than expected at 6.4% providing evidence that the Chinese economy is not struggling under the weight of the Trade Wars. This has weakened the US dollar fractionally since it makes more risky investments like the Australian dollar more attractive.

Moving forward the US dollar may well weaken further as investors seek safer shores should the trade wars not be as bad as expected. The flipside is the US Federal Reserve might now need to think more carefully about its plans to refrain from interest rate hikes, should the global economy receive a boost from China’s strength.

GBP/USD levels seem likely to struggle around the 1.30 level, with little positive news on offer from the UK to provide a big boost. GBP/USD levels might now trend lower as the markets wait for some further clarity on Brexit which might not in the end be forthcoming.

No-deal Brexit is still a possibility and there were signs yesterday of increasing frustration across Europe from the German foreign minister, stating they are not in favour of a further extension after October.

Expectations for the pound will continue to be shaped by Brexit but with no major news due this morning, clients with a position buying US dollar might wish to take advantage of any spikes to mitigate the uncertainty, a move below 1.30 now seems a matter of when not if.

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