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GBP Forecast: Interest Rates Are the Key to the Pound’s Performance

GBP Forecast: Interest Rates Are the Key to the Pound’s Performance

Martin Essex, MSTA, Jeremy Wagner, CEWA-M,

Want the full fundamental and technical GBP forecast for the fourth quarter? Get it here!

Talking Points:

  • The British Pound should continue to benefit from the prospect of higher UK interest rates in the fourth quarter despite Brexit confusion and UK political concerns.
  • However, while GBP may have a fundamental advantage over many other currencies, GBP/USD is ripe for a large trending move lower.

Once again, the British Pound shrugged off the dire predictions of analysts worried about Brexit and a chaotic political situation in the UK to climb against the US Dollar in the third quarter of 2017. Boosted by a growing conviction that UK monetary policy was about to be tightened, it continued to make headway – admittedly helped by the persistent weakness of the Greenback – and in the fourth quarter, there’s no reason to expect that to change.

However, the technical outlook does not look as rosy as the fundamental picture painted. There is a cluster of wave relationships and resistance forming from about 1.37 to1.39. Therefore, GBP may have a fundamental advantage over many other currencies, but GBP/USD is ripe for large trending move lower.

Moreover, if the UK Government collapses completely and a new General Election is called and won by the Opposition Labour Party, the Pound would undoubtedly suffer.

Chart: GBP/USD Weekly Timeframe (September 2013 – September 2017)

GBP Forecast: Interest Rates Are the Key to the Pound’s Performance

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.