News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year)
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
  • There is a ridiculous number of scheduled Fed speeches on the docket next week. Powell specifically will be speaking multiple times including at an ECB hosted forum on central banking (which also has a panel with Fed, ECB, BOE and BOJ heads)
  • USD Ascending Triangle, Bullish for Q4 - #DXY chart on @TradingView
  • Credit rating agency Standard & Poor's is due to give its sovereign credit rating update on Germany today ahead of weekend national elections
  • RT @BIS_org: Since the early 1990s, changes in the #MonetaryPolicy stance have affected a rather narrow set of prices – mostly in the servi…
  • Huawei's CFO Meng Wanzhou reached deal with the US Dept of Justice to return her to China - Dow Jones
  • Cleveland Fed President Loretta Mester says: - sees US GDP in 2022 between 3.75 and 4% - Supports tapering in November and concluding over the first half of 2022 - After liftoff, accommodative policy needed for some time
  • Fed Chairman Jerome Powell doesn't comment on the growth forecast or monetary policy in his introductory remarks
  • Kansas City Fed President Esther George says: - The labor market friction is fading barring a resurgence of virus - A 'normal' economy is likely to remain elusive for some time - Asset buying effects complicate the judging rate change plan
British Pound Q3 Fundamental Forecast

British Pound Q3 Fundamental Forecast

Nick Cawley, Strategist

British Pound (GBP) Fundamental Outlook

  • The Bank of England expects the UK economy to grow by 7.25% this year.
  • UK inflation is likely to exceed 3% for a temporary period.

The UK economy looks to be in rude health with economic growth picking up sharply over the last quarter. According to the latest Bank of England (BoE) report, the recovery in economic activity is ‘most pronounced’ in the consumer-facing services sector after Covid restrictions were loosened in April, with output in some sectors ‘around pre-Covid levels’. The BoE expects the UK economy to grow by 7.25% this year, supported by the successful vaccination program and continued unwinding of lockdown measures, while the Confederation of British Industry (CBI) is more bullish and expects UK GDP to grow by 8.2% this year and 6.1% next year.

This bullish backdrop may come under pressure when the Government’s furlough scheme ends at the end of September. The Office for National Statistics (ONS) said recently that the percentage of workers on furlough has dropped from 20% in late January this year to 7% in late May, although this still leaves 1.5 million workers on the scheme. The end of Q3 will be an important time for the government if they are to get unemployment back down to pre-covid levels.

Price pressures in the UK are also pushing higher with annual inflation hitting 2.1% in May, above the central bank’s target. The BoE expects inflation to exceed 3% for a temporary period, driven higher by energy and commodity prices. This outlook has prompted the market to bring forward thoughts of UK interest rate hikes, although if the recent developments in the US are anything to go by, the BoE will hold back on hiking rates until hard data makes it difficult to avoid.

UK data releases will now play an even more important role in any trading setup with the BoE becoming increasingly data-dependent. While most official data is backward-looking, the confirmation or not, of a trend in growth, employment or inflation, will be used as justification for any moves in monetary policy. The BoE will focus on inflation over the next few months and while they currently see the overshoot as temporary, they must be careful not to paint themselves into a monetary policy corner if price pressures become increasingly sticky.

Over the past two quarterly reports, we have been cautiously optimistic about Sterling and remain so, though we do recognise that the best performing quarters may be behind us. The British Pound may struggle to move meaningfully higher against the US dollar as expectations of tighter monetary policy in the US grow. Sterling may have a better chance of appreciation against other currencies, especially those for countries that are expected to keep monetary policy loose. Traders looking for bullish Sterling plays may be minded to look at GBP/JPY or EUR/GBP, while GBP/CHF may soon break out of its recent trading range.

“To read the full British Pound forecast including the technical outlook, download our new Q3 trading guide from the DailyFX Free Trading Guides”

Traders of all levels and abilities will find something to help them make more informed decisions in the new and improved DailyFX Trading Education Centre

What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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