NAB have revised upwards their pound sterling forecasts for 2020 through 2022. However the closer we get to a 'No-deal Brexit' the heavier the downward pressure will be on the pound.
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British Pound Sterling to US dollar bank forecasts
The drop in the pound towards the end of September has gathered speed on increased concern over more coronavirus cases and Brexit uncertainty.
It marked the first time the UK currency has traded below $1.27 since July.
Market analysts are predicting a possible drop to US$1.25 in the event of a ‘No-deal Brexit’.
The Great British pound sell-off continues as mounting Brexit fears weigh on the embattled currency. Trade negotiations have stalled heightening fears a “no deal” divorce will eventuate. With risk sentiment faltering and Brexit concerns escalating we expect the pound will remain under pressure as we move toward the self imposed October trade deal deadline.
NAB have revised upwards their pound sterling forecasts now expecting the GBP/USD rate to be at US$1.47 by June 2022, up from their previous forecast of US$1.39. For 2020, it sees GBP at US$1.36 by year-end, up from a predicted US$1.30.
Whether any substantial progress can be made on Brexit negotiations as both Britain and the European countries are fighting the pandemic will dominate GBP trends and forecasts in 2020. The closer we get to a ‘No-deal Brexit’ the heavier the downward pressure will be on the pound.
GBP/USD Recent 90-Day Trend
GBP/USD at 1.2711 is a little below its 90-DAY average, range 1.2298 - 1.3384 .
🔔 GBP/USD is DOWN 1.6% this 4-DAY period and at 30-DAY LOWS.
This is a difficult question and the answer really depends on many factors. The best way to consider an exchange rate's relative value is to look at the rate's history.
The following table looks at the change in the GBP to USD exchange rate to the present day for periods going back upto 10 years:
GBP/USD 10 year historic rates & change to 22-Sep-2020 : 1.2732
Note that forecasts and predictions for the AUD/GBP exchange rate change all the time, affected by news events and relative sentiment towards the Australian and UK economies and this exchange rate is even more volatile than usual because of the uncertainties around Brexit.
USD in the markets
Key fundamentals that previously propped up the USD (such as company revenues, inflation rates and interest rates) have been rapidly eroded. However, there are drivers for a temporary shift in risk demand for the US dollar. Nothing goes down in a straight line, and the US dollar might bounce before it continues its trend lower.
The US dollar has dropped steadily for the last 3 months against nearly all major currencies.
However, as reported by Bloomberg Aug 11, the shorting of the US dollar - betting that USD will continue to drop - is becoming a crowded trade and may backfire.
Bank of America predict that an early discovery of a vaccine against the coronavirus would be a positive for the US dollar. That's because Europe and Asia have a higher chance of fresh waves of infections the longer it takes for a vaccine to be found, a scenario that's bullish for the US dollar, read more at the Bloomberg report.
In July market USD forecasts started predicting US dollar weakness during the second half of 2020. This was triggered by the mid-July european leaders delivery a historic stimulus package which was seen by market commentators as positive for the euro and hence negative for US dollar.
In early May the continuing coronavirus pandemic and an associated possible re-escalation in the US-China trade tensions has moved the market into safer currencies such as the USD and JPY.
The US dollar held its value in 2019 despite the US-China trade tensions, mainly because the greenback is still considered a safer currency to own than most others.