Why are analysts predicting that the Pound will fall further?

It’s clear that the Pound has recently been in a downward trend against most major currency pairs, especially the US Dollar as GBPUSD has dropped by 10-cents since early summer.

Last week the Pound weakened after a number of major financial institutions released predictions that the Pound could fall further over the next year. This is in complete contrast to how GBP exchange rates performed in the first half of 2023 when the Pound was the strongest performing currency within the G10 set of countries.

Most notably, Goldman Sachs analysts have predicted that the GBP to EUR rate could drop back below 1.10 over the next 6-months.

Previously, the investment bank was bullish and predicted that the pair would trade at 1.1765 in 6-months’ time, which is just above the current annual high for the pair.

Their outlook has completely changed though after a steep slowdown in the UK economic output readings and the Bank of England’s decision to half interest rate hikes for now. Goldman Sach’s analysts are now predicting a sharp fall to 1.0870 which isn’t far from the lows hit when former Prime Minister Liz Truss announced her disastrous economic plans just over a year ago.

The economic calendar in the UK was light last week and another quiet week is on the cards this week. As the US avoided a government shutdown the key release could be the US Payroll figures which will be released on Friday afternoon.

There are concerns that if the Bank of England opts to start cutting interest rates before the US Fed Reserve, which would be unusual historically speaking, we could see a further sell-off in the Pounds value.

Strong readings for the US jobs market could indicate that there will be interest rate hikes in the US before cuts, making the chances of a BoE cut before the Fed a possibility, so Friday’s release could be important.

The post Why are analysts predicting that the Pound will fall further? appeared first on Pound Sterling Forecast.