During June, the pound weakened notably against the US dollar from 1.2613 to 1.2155. As we enter the second half of the year, some analysts have updated their British pound forecasts. Here you can find the expectations of seven major banks regarding GBP’s outlook for the coming months.
Wells Fargo
“The mix of measured monetary tightening and rapid inflation, combined with a UK economic downturn, provides an underwhelming backdrop for the UK currency. We have revised our forecast for the pound lower, and now see a trough in the GBP/USD exchange rate around 1.17 in mid-2023.”
Credit Suisse
“A central bank that sets a high bar to keeping pace with not just the Fed but even the likes of SNB and maybe ECB going forward, against a backdrop of weak trade dynamics and ambiguous long-term government policy, keeps the door open for GBP/USD to slip towards 1.17 and for EUR/GBP to rise towards 0.90.”
TDS
“The near-term GBP trajectory is biased to the downside, even though it maintains a pretty heft discount. The EURGBP rally reflects GBP's relatively higher beta to risk assets. At the same time, the ECB has turned more hawkish. The BoE plus fiscal support may help to put a floor in cable but not before a near-term break below 1.20. Still, BoE pricing seems too aggressive relative to our forecast, leaving GBP vulnerable on the crosses.”
MUFG
“The risks for GBP/USD over Q3 is to the downside given GBP tends to perform poorly as financial conditions tighten. Beyond then, even as GBP/USD recovers, GBP will remain weak versus EUR.”
HSBC
“Over the medium-term, we continue to expect the GBP to weaken further against the USD, built on more measured steps at the BOE compared to the Fed’s ongoing marked tightening. The UK may also face structural challenges over a longer-term.”
CIBC
“Building macro headwinds suggest that the BoE will not be as aggressive as the market discounts. We expect a protracted policy pause post once rates reach 1.75% in September. As the growth versus inflation trade-off remains challenging, expect the bank to prioritize growth. This favours GBP downside, especially as ongoing political risks, including a potential trade spat with the EU, remains real.”
Scotiabank
“We think market bets on 150 bps+ of additional BoE hikes this year are stretched and a slashing of these will act as a GBP headwind in the months ahead.”