- Attempts to rebound higher for the GBP/USD currency pair still lack strong momentum to confirm a return to the upward path.
- Technically, the currency pair is stable around the resistance level of 1.2645 at the time of writing the analysis.
- Regarding the expected price of the pound sterling in the coming days, one of the largest banks on Wall Street raised its expectations for the pound, saying that it could benefit from its new status as the “European dollar.”
In this regard, Bank of America says that strong labor data and improved fundamentals are leading to expectations that the Bank of England will keep interest rates at 5.25% for longer than other central banks, which will ensure that the pound sterling benefits from "carry" trading. The term “carry” refers to when investors borrow in a currency with a low interest rate to fund assets in a currency with a higher interest rate, creating a supply of that currency. It has been one of the strongest driving forces in the Forex currency markets since central banks started raising interest rates, and its influence appears to dominate as interest rates decline.
Kamal Sharma, an analyst at Bank of America in London, says: "Our increasingly constructive view on the pound is now formally incorporated into our 24-25 profile." The analyst has often appeared in financial news pages for his analysis of the pound after Brexit, where he once described its behavior as similar to that of an emerging market currency.
Now, he has another interesting comparison for the British pound: “GBP = US dollar in Europe.”
The analyst added, saying, “What was relevant in the United States can be similarly applied to Britain, as both economies suffer from high inflation in services and tight labor markets.” Added, “Although growth in the United States of America was stronger for a longer period compared to Britain, the nuance here is that expectations about the macroeconomy in Britain were very low. Also, “As the domestic economy continues to improve, it is difficult to reconcile a pessimistic reading of British growth.”
According to the platforms of Forex currency trading brokers, the dollar and the British pound performed well in 2024, as the markets reduced their expectations for the pace of interest rate cuts in the Bank of England and the US Federal Reserve, which reflects the market’s clear view that what is good for the US dollar is good for the British pound.
Overall, Bank of America's forecasts reveal that it is more optimistic about the GBP/USD and GBP/EUR pairs than the consensus: the pound-to-dollar exchange rate is now expected to reach 1.31 resistance by mid-year, up from 1.26 previously. The year-end target is 1.37, up from 1.33 previously. The EUR/GBP exchange rate is expected to reach 0.84 by mid-year, down from 0.87 previously, and 0.84 by the end of the year, down from 0.88 previously.
GBPUSD Expectations and Analysis Today:
Attempts to rebound higher for the GBP/USD pair continue to lack strong momentum, as mentioned before. The resistance at 1.2775 will remain crucial for any upward trend reversal to occur. Clearly, this could happen if readings from the Purchasing Managers' Index (PMI) for the manufacturing and services sectors in the UK come in stronger than expected, along with improved investor sentiment and the performance of global financial markets. On the other hand, according to the performance on the daily chart above, the support level at 1.2560 will continue to confirm that the bears are ready to resume their downward momentum.
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