🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Sterling set for Q3 slump against dollar as bulls wave goodbye to bullish bets

Published 09/25/2023, 04:15 PM
© Reuters.
GBP/USD
-

Investing.com -- The pound on Monday looked set to wrap up the third quarter at the end of week with hefty losses against the dollar, and likely faces uphill battle ahead as sterling bulls are throwing in the towel to join the bears in forecasting doom and gloom for the currency following the Bank of England's rate pause last week.       

GBP/USD fell 0.2% to $1.22, keeping it on track to post a 4% decline in Q3, but there could likely be further selling pressure in the months ahead.

Goldman Sachs waves officially waves goodbye to bullish bet on sterling

"We are revising down our GBP/USD forecast path to 1.18, 1.20, 1.25 in 3, 6, 12 months (vs 1.24, 1.29, 1.33 previously ... and officially shifting back to Sterling bears," Goldman Sachs said in a recent note after recently revising down its expectations for the level of peak U.K. rates, or terminal rate, after the Bank of England held interest rates steady at 5.25% last week.

Goldman Sachs had previously expected the pound to continue racking up gains against its rivals on bets that the BoE terminal rate would need to reach 6% "due to the strength in the domestic data." But that proved an overestimation with Goldman Sachs now suggesting that rates have peaked, as a faster than expected slowing inflation and weaker growth has been enough to persuade the BoE to lean less hawkish.

Economic upside surprise could turn savior for battered pound   

Better-than-expected economic data, however, could help the pound snap out of its funk as it would force the BoE to reconsider its progress on slowing inflation, Goldman Sachs adds, pushing the BoE back towards a more 'forceful' response.

But recent data including weaker manufacturing data released Friday, suggests this is unlikely and has vindicated the BoE's decision to keep rates on hold, ING said.

"Our economics team is now calling for another hold and the end of the tightening cycle in the UK," ING added. "Markets agree with this view and only price in a 25% chance of a November hike and a 50% probability of a hike by December."

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.