Pound to US Dollar Outlook: As Sterling weakens, will GBP/USD break below 1.20?

Pound to Dollar Rate Extends Gains

Pound to US Dollar exchange rate

Pound to US dollar exchange rates have continued to move lower the past 3 months, with the interbank exchange rate trading between 1.3151 and 1.2091 in that period, having last been over 1.30 at the beginning of May. A quick review of various forecasters sees many predictions for GBP/USD to hit sub 1.20, should a no-deal Brexit take place. Important economic news this week might take a backseat to the ongoing political news on Brexit and the Trade Wars, both of which can be mostly linked to recent movements.

US interest rates & the US China trade war: How have these events affected the GBP/USD exchange rates?

The US dollar has weakened today as the deterioration in the Trade Wars increases the chances of the US central bank, the Federal Reserve cutting interest rates. Pound to US dollar exchange rates had fallen last week into the 1.20’s as GBP weakness on Brexit, and a stronger dollar on the back of decreased US rate cut expectations combined.

The US Fed, in cutting rates last week, indicated they were not necessarily pressing for further cuts. This helped the US dollar to rise but the immediate developments with Trump indicating further tariffs on Chinese goods, and then the Chinese looking to weaken their currency, which dropped to an 11-year low against the dollar today, has increased the chance the Fed will need to cut.

Pound to US Dollar forecast: What could happen?

JP Morgan are reported in the FT at quoting 1.15 on pound to US dollar exchange rates if we hit a no-deal Brexit, in a ‘conservative’ estimate. Nomura, the Japanese bank, are bolder predicting 1.01 on GBP/USD on a no-deal, in the same article.

With US stocks having their worst day of 2019, confidence is low, and whilst this might weigh on sentiment on the US dollar, any rush to ‘safe havens’ to could see the US currency strengthen too.

Key news for the rest of this week for the British and US economy is limited, Thursday is jobless claims for the US and Friday UK GDP (Gross Domestic Product). We know the economic data has not been taking too much attention of late, we might find more movement stems from the ongoing political concerns globally on Brexit and Trade Wars.

At any point, a sudden headline or tweet could easily change the sentiment on both of these key issues. In such an environment, pound to US dollar exchange rates below 1.20 cannot be ruled out, client looking to capitalise on or avoid such a scenario may lodge interest with us to help keep them updated on the latest news.

If you have a currency transfer to consider in the future on GBP/USD, please feel free to lodge interest with us to discuss the latest news and events.