**Rabobank Pound to Dollar Price Forecast: Bearish Momentum in GBP/USD**
*This article is based on original reporting by James Elliott for ExchangeRates.org.uk.*
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**Introduction**
The Pound Sterling (GBP) has faced significant downside pressure against the US Dollar (USD) in recent months, with the GBP/USD exchange rate exhibiting persistent bearish momentum. According to recent analysis and forecasts from Rabobank, this downward trend may continue into the near to medium term, influenced by a confluence of macroeconomic, monetary policy, and market sentiment factors. In this article, we delve into the key drivers behind the recent performance of GBP/USD, Rabobank’s revised forecasts, and what market participants might expect in the months ahead.
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**Pound Sterling’s Underwhelming Performance in 2024**
As the second quarter of 2024 unfolds, the Pound to Dollar exchange rate remains subdued, struggling to regain the levels observed at the start of the year. Several themes have converged to exert downward pressure on the GBP relative to the USD:
– **Interest Rate Expectations**: The Bank of England (BoE) has maintained a cautious stance on monetary policy, with markets pricing in gradual rate cuts ahead, while the US Federal Reserve has consistently projected a more gradual and data-dependent approach to loosening policy.
– **UK Economic Data**: A string of lackluster UK economic indicators, notably weak retail sales and stagnating wage growth, have tempered confidence in the UK’s economic resilience.
– **Political Uncertainty**: The approach of a general election in the UK scheduled for 2024 has added a layer of uncertainty, weighing further on the currency.
– **Global Risk Sentiment**: Periods of risk-aversion in global markets have benefited the US Dollar at the expense of Sterling, given the Dollar’s status as a safe-haven currency.
These factors have set the stage for Rabobank’s recently updated GBP/USD outlook, which signals a continuation of bearish momentum into 2025.
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**Rabobank’s View: Bearish Momentum to Dominate**
In the latest note to clients, Rabobank strategists emphasize several reasons behind their cautious GBP/USD outlook:
– The GBP/USD rate has been unable to break and hold above intermediate resistance levels, with technical indicators also signaling vulnerability.
– A slower-than-expected economic recovery in the UK has kept the BoE on the dovish side compared to the Federal Reserve.
– Expectations surrounding US economic outperformance and relatively higher US interest rates have widened the yield differential in favor of the Dollar.
– Continued concerns over the trajectory of UK government finances ahead of the coming general election.
**Key Forecast Highlights from Rabobank**
– The forecast for GBP/USD by year-end (2024) is set at 1.23, lower than previous projections.
– Rabobank’s year-end 2025 forecast stands at 1.28, reflecting a subdued recovery path for the Pound.
– The near-term trend is expected to remain bearish, with temporary rebounds likely to be sold into by market participants.
Rabobank analyst Jane Foley, cited in the original ExchangeRates.org.uk article, notes, “EUR/GBP remains within its fairly tight range, but GBP/USD bullish momentum has stalled in recent weeks. We forecast GBP/USD at 1.23 on a three-month view and see scope for a gradual recovery to 1.28 by end-2025.”
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**Breakdown of Key Drivers Affecting GBP/USD**
**1. Divergent Central Bank Policies**
– The Federal Reserve, despite pausing its rate hike cycle, continues to maintain a hawkish tone. Persistent inflation and robust labor market data have kept markets wary of any swift monetary easing.
– The Bank of England, facing weak economic growth and signs of a cooling labor market, is more likely to initiate rate cuts sooner than might have been previously anticipated.
– The divergence in central bank policies and forward guidance has increased the attractiveness of the US Dollar relative to the Pound.
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