**Turning Point for Pound Sterling? Pound to Dollar Forecast Update**
*Original Author: James Fuller for CurrencyNews.co.uk*
The British Pound has experienced significant volatility in recent weeks, leaving many investors and traders to question whether a turning point is on the horizon for GBP/USD. As economic data, political developments, and global market dynamics continue to shape the trajectory of the Pound Sterling, it is essential to evaluate the latest forecasts and analyze the factors influencing its value against the US Dollar.
### Recent GBP/USD Performance
Over the past several months, the GBP/USD currency pair has fluctuated within a fairly wide range. Investors have kept a close eye on UK economic releases, Bank of England (BoE) policy signals, and broader risk sentiment to navigate the sharp swings in Sterling’s fortunes.
– In early 2024, GBP/USD made gains on the back of constructive risk appetite and tentative signs of UK economic resilience
– A series of mixed data prints, however, dampened momentum, and concerns about persistent inflation have caused the BoE to tread carefully regarding any policy tightening or easing
– The US Dollar, meanwhile, has benefitted at times from expectations of a “higher for longer” stance from the US Federal Reserve and ongoing geopolitical uncertainties
As of mid-June 2024, GBP/USD has struggled to maintain gains above the 1.28 mark, with resistance around 1.29 and support commonly found near 1.26. This choppy action has prompted a reassessment regarding the outlook for the pair, particularly as economic expectations evolve.
### Economic Data: Mixed Signals for the UK
The UK economy has delivered a combination of positive surprises and renewed challenges. Growth figures, inflation data, and labour market releases are among the key reports driving Sterling’s movement.
**Growth and Output:**
– The UK economy exited a technical recession earlier in 2024, reporting modest GDP growth in the first two quarters
– Forward-looking surveys, such as the Purchasing Managers’ Index (PMI), signal a tentative stabilization, especially in the services sector
– Manufacturing continues to lag, but recent data hint at a potential bottoming-out of industrial contraction
**Inflation and the Bank of England:**
– UK inflation has gradually slowed from the multi-decade highs seen in 2023, but remains above the BoE’s 2 percent target
– Core inflation metrics are still elevated, raising questions about the timeline for rate cuts
– The BoE has maintained its policy rate at 5.25 percent since August 2023 but is expected to start easing later in 2024
– Money markets as of June are pricing in the first 25bps cut at either the August or September meeting, with a second cut by year-end
**Labour Market and Wages:**
– Unemployment has edged slightly higher but remains historically low compared to the past two decades
– Wage growth, stripped of bonuses, is holding relatively steady, which may complicate the BoE’s balancing act on inflation
The general conclusion from the data is that the UK is avoiding a deeper recession, but ongoing cost-of-living pressures and sluggish productivity growth continue to weigh on household and business sentiment.
### US Dollar Dynamics: Shifting Expectations
The Dollar’s outlook is shaped primarily by US Federal Reserve policy, US economic growth, and global market risk appetite.
– The Federal Reserve held steady at its June meeting, maintaining interest rates at 5.25-5.50 percent
– US inflation data has moderated, though the Fed has emphasized the need for “greater confidence” before initiating rate cuts
– Markets expect at least one rate cut by the end of 2024, a somewhat slower pace than previously anticipated
– Robust US jobs data and resilient consumer spending have underpinned the Dollar, but any signs of economic softening may trigger a reversal
Until there is clarity on the timing and magnitude of Fed rate reductions, the US Dollar may remain supported, particularly in periods
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