The British Pound (GBP) is back at multi-week lows against the Euro (EUR) and at multi-month lows against the US Dollar (USD) as confidence in Sterling continues to dissipate. The forecasted depreciation of the British Pound in the next 3-6 months is closely tied to the Bank of England's interest rates. What are the latest GBP/USD and EUR/GBP price predictions for 2024 and beyond?
The Bank of England recently left the UK Bank Rate unchanged at 5.25%, after 14 consecutive rate hikes, and hinted that, all things being equal, that rate rises in the UK may be a thing of the past.
A narrow majority of MPC members opted to maintain rates on hold, according to the most recent BoE MPC minutes. Given how these members perceive inflation and growth in the upcoming months, the 5–4 decision raises more concerns than it answers. If inflation is declining as reported by the BoE, does this indicate that UK growth was lower than anticipated and that the UK central bank is acting in advance to stop the economy from entering a recession? What will happen if inflation resumes its upward trend, as it did at the beginning of Q1? Will the BoE increase interest rates once more?
This article brings you the latest institutional Pound forecast and price predictions for 2024, as well as a detailed fundamental and technical outlook for the last quarter of 2023 and beyond.
Key British Pound (GBP) Forecast & Price Prediction Summary
- British Pound (GBP) price prediction Q4 2023: While the possibility of an oversold bounce can’t be ruled out, analysts forecast more losses are likely in Q4 with the pound likely to trade at 1.20 against the US Dollar.
- British Pound (GBP) price prediction 2023: It may still take a few months until the BoE feels more comfortable with a peak rate of 5.25%, before it could lower rates again from the second quarter in 2024. While ING forecasts GBP/USD to reverse the actual downtrend and advance up to 1.29 by the end of 2024, other institutional forecasts are bearish and forecast Pound to slip well below 1.20 against the US Dollar in 6-12 months.
- British Pound (GBP) forecast for the next 5 years: While the UK may avoid an official recession, the UK economy, and the Bank of England, may well face the tricky problem of stagflation in the quarters and even years ahead.. However, this raises the question of how much negative news has been priced into the Pound.
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British Pound (GBP) Forecast Q4 2023 & 2024- Fundamental
Price movement in other GBP crosses suggests that the pound began to decline more significantly at the end of August, when UK data repeatedly highlighted weakness. Investors reduced their expectations for a UK interest rate hike as a result, first gradually and then more quickly. Prior to the Bank of England's final meeting on September 21, market expectations dropped from three additional 25 basis point rate hikes to just one in 2023. However, even though a raise was anticipated, a divided BoE decided to retain rates at 5.25% in that meeting. This increased the likelihood that interest rates in the UK had peaked. As a result, the British Pound accelerated the decline against US Dollar and other currencies.
Compared to many other advanced nations, UK inflation and (concomitantly) interest rates have soared in the previous two years. In this area, people frequently fix their mortgages for 2 or 5 years. Households had to pay hundreds more each month to cover loan repayments as more and more mortgages reached the end of their fixed periods. This was difficult for them given that they already had high energy costs and rising prices for goods. Households that rent their home are affected, too, as rental yields rise in line with the broader interest rate environment. Spending on things that weren't necessary had to be put on hold as a result. This was demonstrated by the decrease in the monthly GDP estimations.
The Purchasing Managers’ Indices (PMIs), a more forward-looking economic indicator, have not only remained in the contraction territory (<50.0), but the pace of the weakness has been deteriorating. The manufacturing PMI has remained below 50.0 for 13 consecutive months, with the monthly prints missing the already-downbeat expectations for the past 6 months. The services PMI only moved below 50.0 a couple of months ago, but it too has been missing expectations for the last 5 consecutive months.
Due to the residual effects of high inflation and monetary policy rates that will become more and more restrictive in real terms as inflation declines, economic growth in the U.K. is expected to be modest in 2024. This fundamental view of the U.K. economy remains largely unchanged from the late August update of the Pound Forecast & Price Predictions.
Analysts and rating agencies revised the growth forecast for Q4 to 0.3%-0.5% from 0-0.2%, but downward for 2024 to 0.4%-0.5% from 0.7%-0.8%, shifting some of the slowdowns into next year.
Summary of the Fundamental Pound Forecast for the next 3-6 months
- The near-term UK outlook is gloomy, and analyst forecast Pound unlikely to find help from UK data with economy on the brink
- Looking forward, analysts expect the U.K. economy to continue its path of muted growth, close to stagnation, into 2024, as real interest rates become increasingly restrictive.
- Headline inflation remains high but is forecasted to fall back close to the 2% target in the second half of 2024. The BoE may have raised interest rates for the last time in this cycle, provided pay growth also eases soon.
- Real wage growth has turned positive. Together with a labor market that should remain firm by historical standards, this should mitigate an otherwise constrained growth environment.
Pound to Dollar (GBP/USD) Fundamental Forecast: The US dollar is unlikely to turn sharply lower any time soon
The US dollar has enjoyed one of its longest winning streaks against nearly all major currencies, closing higher for 11 consecutive weeks in Q3 2023. Federal Reserve was encouraged to maintain a hawkish outlook on interest rates by stronger data and signs of sticky inflation, as well as the recent crude oil price gains.
FOMC now projects just two rate cuts instead of 4 for next year, with the first cut expectations pushed back well into the second half of 2024. As a result, the Treasury yield rises to a 16-year high up to 4.50%, potentially paving the way for 5.0%.
A more hawkish central bank than elsewhere is precisely why US bond yields and the dollar have enjoyed such a strong rally that argues against a quick GBP/USD recovery in Q4. After all, strong trends need to weaken first before they can reverse. For the tide to turn, time is needed, weeks, if not months.
Therefore, the pound forecast for the next 3-6 months is bearish and any short-term strength in the GBP/USD should not be mistaken for a trend reversal, if not backed by a trend of strong UK data and/or a trend of weaker US data and expectations that FED may cut more and/or earlier (more plausible).
Euro to Pound (EUR/GBP) Fundamental Forecast: ECB at the end of the hiking road
The ECB signaled the end of the rate hiking cycle after the 10th consecutive rise to a record 4%, encouraged by the larger-than-expected drop in September’s inflation data.
Christine Lagarde pointed out that rates may remain high for longer in order to curb inflation rather than strengthen the euro, but expectations that rates will remain high for longer might drive a deeper selloff due to worries about the potential effects on the eurozone economy.
Given that the eurozone economy is already showing evidence of weakness and that there is a delay between interest rate increases and their effects on the real economy, a recession or at the very least an extended slowdown in growth is likely in Q4. The ECB's potential interest rate cuts, which would put extra pressure on the EUR, will undoubtedly draw the market's attention.
Should data suggest that the eurozone economy is bottoming out, this could paint a slightly more upbeat picture for the EUR. However, given that the ECB is likely to start cutting rates next year ahead of the BOE, the EUR/GBP could struggle to make meaningful gains.
Pound to Yen (GBP/JPY) Forecast – Fundamental: Can the BOJ abandon the negative interest rate policy?
Over a longer time frame, the probabilities don't change considerably much either. The 'virtuous cycle' between wage growth and inflation is not yet self-sustaining, thus the BOJ is unable to change its ultra-easy monetary policy settings currently. Yes, there is inflation in Japan, but the country is also struggling with slow economic development, unfavorable demographics, and a pervasive deflationary attitude, making a sustained increase in salaries next year anything but guaranteed.
The BOJ is unlikely to make significant changes to yield curve control, the practice of keeping bond yields lower than what market forces would typically suggest, or to raise its key overnight policy rate from -0.1% until that becomes a much more likely scenario.
The BOJ's issue is that time is not on its side. If at all, it won't be until well into the following year before ultra-lax policy settings can be adjusted. The chances are minimal at best. When other developed central banks are anticipated to start easing, the BOJ's policy normalization would probably cause the yen to strengthen quickly, amplifying deflationary forces through cheaper imports while also lowering its export sector's competitiveness and increasing the risk of slower economic growth. Good luck attempting to promote inflation in such a setting.
Simply said, Japanese rates are unlikely to rise significantly above their current levels until the BOJ can normalize policy, maintaining the widespread with UK bonds.
British Pound (GBP) Forecast - Technical Outlook 2023
Looking ahead into Q4 2023 and even the next 6 months, Pound is forecasted to decline further, especially if BOE leaves interest rates untouched. Looking at three different Sterling-pairs, GBP/USD may struggle to move higher, EUR/GBP needs to hold a multi-month range, while GBP/JPY may be vulnerable to a hawkish Bank of Japan (not something that’s been heard for some time).
Pound to Dollar (GBPUSD) Technical Forecast December 2023
The technical picture does look negative with key support around 1.2400 clearly broken down, and the GBP/USD moving and holding below it, this means the path of least resistance remains to the downside. The pair has been trading below all three simple moving averages, and with lower highs and lower lows all over the chart since early Q3. Additionally, a cluster of old daily highs and lows on either side of 1.2200 is the next likely support if the sell-off continues, followed by 1.20. A confirmed break here sees 1.18 come into play.
If cable can regain the 200-day SMA, currently at 1.2432, and the 3-month trendline, the picture becomes slightly better with 1.2447 and 1.2547 the next two points of interest. Correlating the technical outlook with the Pound price prediction from banks and agencies, GBP/USD should consolidate at 1.20 or capitulate at 1.18 before reversing the downtrend starting with Q2 2023.
Euro to Pound (EURGBP) Technical Forecast December 2023
Since May 2023, the EUR/GBP has been one of the slightly longer-term range traders, with a holding price action range of 0.8500 to 0.8700. If resistance holds, the most recent advance towards it may present an opportunity for traders to continue the range trading towards the support level as the target.
The 200-day SMA is overhead and could provide early resistance near the price of 0.8710 now. The CCI indicator indicates that the pair is overbought, which may assist in limiting further upward movement. However, 0.8828 enters the picture if resistance is indeed broken.
Pound to Yen (GBPJPY) Technical Forecast December 2023
Long GBP/JPY has been a one-way carry trade since the start of the year as the pair rallied from 155 to a peak of 186.35 in late August. Subsequent attempts to break higher failed and GBP/JPY has been moving slowly lower, as the multi-month vertical movement shows some signs of weakening.
The pair is struggling to advance after breaking the trendline, in part on growing expectations that the Bank of Japan may soon announce that they are looking at tighter monetary policy, or by firm guidance that Japanese officials want to see the Yen strengthen.
Such a scenario will leave the neckline and the late July spike low at 176.25 the next level of interest. Below here 172 and 169 come into play. The pair are below the 20- and 50-day SMAs but above the 200-day SMA, while the CCI indicator shows the pair as oversold.
British Pound (GBP) Price Predictions 2024 and Beyond
Here we look at the latest Pound forecasts for 20234 and beyond, including comments from highly rated institutional FX strategists.
The BoE held interest rates at 5.25% following the latest policy meeting, contrary to consensus forecasts of a further 25 basis points to 5.50%.
The updated guidance from the BoE signaled that they are moving their focus towards keeping rates at higher levels for longer to bring down inflation rather than continuing to hike rates further into restrictive territory, according to MUFG.
The bank, however, expects divergence in views to develop; “We find it harder to buy into this policy view for the BoE than for the Fed at present given much weaker activity data in the UK relative to in the US. The BoE policy rate is currently expected to remain above 5.00% for most of next year. We expect the UK rate market to price more BoE cuts back into next year in the coming quarters.”
Investment Banks continued to lower their BoE forecasts with at least 10 major banks including Barclays, HSBC, and Bank of America lowering their peak forecast to 5.25% from 5.50%. Deutsche Bank and JP Morgan have cut their peak forecast to 5.25% from 5.75% previously.
According to Commerzbank, the pound remains in an impasse. The concern that now emerges, according to the bank, is how the BoE will respond if pricing pressure does not decrease as quickly in the upcoming months as currently anticipated. The BoE's decision would undoubtedly be met with skepticism by the market, which will probably push the pound. It anticipates that momentum for rate decreases will increase if inflation continues to improve. The German bank forecast that one way or another, prospects for the Sterling remain muted in this context.
RBC Capital Markets is negative on the economic outlook; Just because GBP has not benefitted from rising rate expectations, it does not follow that it will be similarly immune to markets starting to discount cuts.
TD Securities expects the BoE will hold rates until May 2024.
Pound To Dollar Forecast 2024: "1.2000 Or Below Can't Be Ruled Out"
According to Wells Fargo: “The decision to pause and the probable end to policy tightening represents a loss of interest rate support. As a result, we think the risks remain tilted toward further Sterling weakness through early 2024. In that context, a move to 1.2000 or below cannot be ruled out.”
TD Securities remains bearish on the pound forecast for the next 6 months; “GBP/USD opens up a move to 1.21 here, but we also think GBP slides on the crosses.”
In the latest Pound to Dollar forecast for 2024, MUFG sees little in the way of technical support now until closer to the 1.2000 level which leaves the Pound vulnerable to further weakness.
Danske Bank maintains a 6-month pound-to-dollar forecast of 1.20 with dollar strength and a fragile cable due to domestic growth concerns and a potential recalibration of BoE market pricing.
RBC expects that tighter monetary policy will spread from the housing sector, undermine the wider economy, and damage the Pound.
The bank is also bullish on the dollar; “when we think about the underlying drivers for our USD view – a US economy that is more resilient than expected, a failure of bonds and equities to sustainably rally together, a slowdown in RoW growth has turned out to be deeper than thought, we couldn’t see a reason for USD to start heading lower from Jan 2024.”
Overall, given this combination, it forecast Pound to Dollar will slide to 1.17 at the end of 2023. RBC has one of the most bearish pound forecasts in the next 6 months with lows at 1.11 in mid-2024.
Rabobank expects that the US economy will weaken and prevent further rate hikes, but added; Nevertheless, the risk to our baseline is to the upside. As long as the economy stays strong, and labor markets tight, additional hikes are likely.”
Rabobank expects that USD strength will prevail into early next year, and forecast the pound for the next 3 months to drift towards 1.23.
Societe Generale is pessimistic surrounding the European economic outlook and still expects that the US will out-perform: “The only positive I can think of for the Euro or Sterling, in a world where growth expectations are the biggest driver of exchange rates, is that expectations about UK and Eurozone growth are already dire relative to the US.”
The bank forecast Pound to Dollar could get to 1.20 if we don’t get any positive surprises from the real economic data in Europe soon.
ING’s price prediction for GBP/USD is the most bullish
Meanwhile, ING revised its forecast for GBP/USD to edge to 1.29 in Q3 2023 and 1.31 by the end of the year. The Dutch bank forecasted Pound to Dollar to close in 2023 at 1.22 and gradually appreciate up to 1.29 in 2024.
Euro to Pound is forecasted to follow a flat trend in the last quarter of 2023, around 0.88, and advance towards 0.90 in 2024.
Euro To Pound Sterling Forecast: 0.85 In Three to Six Months
The analysts at Rabobank suggest a slight bias lower for the Euro (EUR) against the Pound Sterling (GBP) in the near-term outlook.
They forecast Euro to Pound to edge lower to 0.85 on a 3-to-6-month view, but expect the currency pair to remain within its familiar range.
Pound to Dollar price predictions (GBP/USD) from AI-based websites
According to Trading Economics global macro models and analysts' expectations. the British Pound is forecast to trade at 1.20 by the end of Q4 2023. Looking forward, the website estimates GBP/USD to trade at 1.14 in 12 months’ time.
Another AI-based website, LongForecast, estimates GBP/USD to close in 2023 at around 1.20. The website forecasts the British Pound to reach a 1.245 high against the US Dollar in November 2023.
The British Pound forecast for the next 5 years is neutral, with GBP/USD trading around slightly below 1.23 after trading above 1.34 during Q3 2024.
The Pound to Dollar (GBPUSD) forecast for 2023 from algorithm-based forecaster WalletInvestor was slightly bearish, with the pair set to trade close to 1.21 by the end of Q4. The Pound to Dollar forecast for 2024 shows a closing price of 1.18.
Regarding the British Pound's long-term forecast, the website is predicting that the pair could trade at 1.15 in 2025 and 1.12-1.13 in 2026.
Analysts have not issued a GBP/EUR forecast for 2030, yet the pound 5-year price prediction from WalletInvestor went as far as 2028, predicting the pair will trade around 1.06.
The monthly Pound / Dollar (GBP/USD) Forecast 2023 from PandaForecast is bullish for the last quarter year when the currency pair should trade as high as 1.26. Their 5-year Pound forecast is very bullish with GBP/USD price predictions above 1.32.
Euro to Pound price predictions (EUR/GBP) from AI-based websites
Trading Economics forecast Euro British Pound Sterling to be priced at 0.86811 by the end of this quarter and at 0.87736 in one year, according to their global macro model's projections and analysts' expectations.
Euro to Pound forecast for 2024 is 0.848, with the pair expected to close 2023 at 0.859, according to Long Forecast website.
GovCapital forecasts Eur/Gbp to trade at 0.863 by the end of Q4 2023, while the Euro to Pound forecast for the next 6 months is 0.847. The Euro to Pound forecast for 2024 is a trading range between 0.85 and 0.87.
Pound to Yen (GBP/JPY) price predictions
Trading Economics forecasts the British Pound Sterling Japanese Yen to be priced at 183.018 by the end of Q4 2023 and at 184.155 in one year, according to its global macro models projections and analysts expectations.
What drives the GBP/USD Currency Pair
The EUR/USD trend depends on what stage of the cycle the global economy is at. During a recession, the demand for safe-haven assets, including the US dollar, increases. As a result, the pound/dollar goes down.
During a recovery from a recession, investors are not that focused on preserving money. Retail investors search for ways to multiply the deposit. At this stage, the fundamentals driving the GBP/USD currency pair are the GDP growth rates and the monetary policy of central banks.
A strong economy is a strong currency. The rapid rebound of GDP after the recession is a reason to buy securities of the country. In particular, the belief that the US economy will fully recover from the 2020 recession in the second quarter of 2021 and exceed its potential level in 2022 contributed to the USA 500 rally by 18% from January to early August. As a result of the capital inflow into the US stock market, the US dollar was strengthened.
The GDP rate is a tier-1 indicator but, unfortunately, lagging. The GDP report is published a month or month and a half after the end of the quarter. Therefore, it is very difficult to determine whose economy is growing faster at a particular time, which doesn’t provide a clear picture of the current economic situation to investors. That is why forex traders have to monitor some leading indicators, such as the US and UK PMIs.
The more the economy heats, the more likely the central bank to phase out the quantitative easing program and hike the interest rates. As a result, the assets denominated in the local currency grow more attractively. That is why the US dollar is currently strengthening against a basket of major currencies.
To understand the Fed’s intentions, one should track such economic indicators as inflation and unemployment rates. When these indicators reach the thresholds set by the Fed, the central bank starts scaling back monetary stimulus. In this case, the greenback will grow in value.
Speeches of central bank representatives are important in forecasting the GBP/USD exchange rate. The officials’ comments give a clue on how the central banks’ policies could change, and investors could develop trading strategies based on this.
Pound Forecasting and Trading Tips
Monitor the global financial markets. If the S&P 500 and oil are rallying up simultaneously, it is a reason to buy the Pound versus US Dollar. If the stock index is growing and the black stuff is falling in value, or both financial assets are depreciating, it may be relevant for traders to look for sell opportunities in the GBPUSD. A necessary condition to look for buy opportunities in the long term is the sync trends in the global economy. If the US GDP features robust growth, but the UK area faces problems, traders may look for sell opportunities. Use technical indicators in trading the GBP/USD to determine the current market state and key support/resistance levels. If the Moving Averages often cross the GBPUSD chart, the market is trading flat. If the price chart is above the EMA, the trend is bullish; if the price is below the indicator, the underlying trend is bearish. Use Japanese chart patterns and western chart patterns like head and shoulders, double top and bottom, or triangles to identify entry and exit points. Study the history of the financial asset’s quotes. An example that took place in the past may emerge in the future as a potential GBP/USD price movement. Do not try to use all popular trading strategies; you’d better find the one that suits you best. Always observe the rules of your online trading system.
Summary of Pound Price Predictions
GBP/USD, EUR/GBP, and GBP/JPY, are expected to be influenced by various factors including the Bank of England's interest rates, a dominant US Dollar, maintaining multi-month ranges, and a bullish Bank of Japan. These factors will play a crucial role in shaping the Q4 performance of the British Pound.
It’s important to remember that any long-term forecasts, even the GBP/USD forecast, or any other currency pair, are too unreliable to believe in. Too many factors may affect the rate of the currency pair, and it’s best to be up-to-date with what’s happening in the global arena in order to make realistic and reliable predictions.
If you do decide that trading this currency pair is something for you, and you believe in the future of the British Pound vs. US Dollar pair, first, you need to decide on a suitable trading strategy for you and work it out first on a demo account, and then on a real account.
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