British Pound Forecasts: Outlook for Sterling to Euro, US, Aus and Canadian Dollar Exchange Rates

By Will Peters

The pound sterling (GBP) exchange rate complex maintains a positive tone on global FX markets with gains against the EUR and USD being particularly notable.

The monthly Services PMI data has confirmed the UK economic outlook remains bright; and this continues to reinforce current trends. Technical indicators will be key as we see little on the domestic data calendar to drive the GBP on Wednesday.

Before we consider the latest sterling exchange rate forecasts at our disposal, the following levels are in play:

Pound to Euro exchange rate: 1.1519
Pound to US dollar: 1.3084
Pound to Australian dollar: 2.0807
Pound to Canadian dollar rate: 1.8143
Pound to New Zealand dollar rate: 2.2461

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Sterling dollar forecast: A test of 1.7 on the cards but resistance ahead

The ability of the pound dollar exchange rate to finally hit the 1.7 level has become all the more possible owing to the building momentum in the pair.

According to Gareth Berry at UBS: "With bullish trend in place, there’s scope for extension of the strength to resistance at 1.7043 and then 1.7332. Support is at 1.6763."

Also advocating a bullish bias on the sterling complex is Luc Luyet at MIG Bank:

"GBP/USD has broken the key resistance at 1.6823, opening the way for a test of the major resistance at 1.7043. Friday's weakness has almost been fully erased confirming a persistent buying interest. Supports stand at 1.6823 (02/05/2014 low) and 1.6763. An hourly resistance lies at 1.6920.
 
"In the longer term, prices continue to move in a rising channel. As a result, a bullish bias remains favoured as long as the support at 1.6661 (15/04/2014 low) holds. However, we are reluctant to suggest an upside potential higher than the major resistance at 1.7043 (05/08/2009 high), especially given the general overbought conditions."

Pound to euro forecast: Exchange rate still stuck in mid 1.21's

Unlike GPB/USD, there is no clear upside momentum in the pound euro exchange rate at present.

The rate remains stuck around the 1.2150 area with the persistent out-performance of the UK economic data set unable to stimulate GBP/EUR higher.

Commenting on the outlook for sterling euro is Bill McNamara at Charles Stanley:

"The pound has been gaining ground against most leading currencies of late but last month’s price action merely succeeded in getting it back to where it finished at the end of March, and the net change on the month was negligible.

"However, the technical picture has changed slightly, in as much as the latest price action for sterling has lifted it up through its long-term downtrend, albeit somewhat cautiously; before we can safely assert that a break-out is underway we will need to see a close above the intermediate February peak, at 1.229."

Pound to Aus dollar forecast: Weakness below 1.826

Turning to the pound / Australian dollar, we note the outlook is dominated by resistance at 1.823.

Below here weakness in the near-term is tipped to persist with an analysis provided by IG suggesting a decline to 1.815 could transpire.

However, above 1.823 we should be on the lookout for advances to 1.826 and 1.827.

Commenting on the technical setup in GBP/AUD, the IG analysis says: "The RSI is below its neutrality area at 50. The MACD is positive and below its signal line. The MACD must penetrate its zero line to expect further downside. Moreover, the pair is trading under its 20 MA (1.8209) but above its 50 MA (1.8185)."

Pound to Canadian dollar forecast: The broader picture remains firm

The sterling to Canadian dollar outlook remains positive in the medium-term, this despite a grind in narrow ranges around the 1.85 level.

Shaun Osborne at TD Securities reckons the upside will eventually be broken:

"Narrow range trading persists in GBPCAD, with the positive momentum this market had generated through April’s rebound now stalling.

"If the short-term outlook is more neutral today, the broader picture still looks constructive—the upward sloping and narrowing trading range seen since the start of the year is a bull wedge pattern that simply suggests that GBPCAD is coiling ahead of another, broader push higher. We look for gains to accelerate above 1.8645/50 and continue to target 1.92. We spot firm support now at 1.8250/60."