What does the GBP/USD forecast look like for the months to come, and should swing traders consider taking advantage of the current situation? I don’t have a crystal ball, but I do have plenty of data and research to inform my thinking.
I have experience trading not just forex but also stocks and options as futures and cryptocurrencies. For a period I day traded futures, and among my long-term investments, I have a portfolio of residential rental properties. I hope you find this and the blog post its based on, useful.
When the UK economy is at risk of becoming inflationary, the central bank raises interest rates to make the UK’s returns seem more attractive to foreign investors. This encourages pension funds to sell USD and to buy GBP, making the GBP relatively more valuable.
Instead, the UK’s Central Bank has recently pushed interest rates even lower than they were already to counteract the effect of the economic contraction. This makes the UK less desirable to foreign investors. Nonetheless, the UK economy has shown some hope of recovering from the COVID-19 crash.
The IMF predicts a 6.5% fall in the value of the GBP, and this could go even lower. However, other analysts suspect that the USD is overvalued and that this will ease some of the tensions. This could also depend on the outcome of the upcoming US elections.
It would be a stretch of the imagination to come up with an optimistic, upbeat prediction for the future of the British Cable Pound. Unless the fortunes of the UK and its currency drastically change, it seems to be heading for greater volatility or a weaker currency — and probably both.
Previously, it was fear that the government’s fiscal stimulus measures come crashing down and the country would crash out of the EU — that led to fears the GBP is would decrease further relative to the USD.