Pound Forecast to Enter Sideways Move vs US Dollar, Tipped to Gain vs the Euro

Pound Sterling Live have tapped a number of the big-name exchange rate forecasters to try and get an understanding of where the the pound sterling, euro and US dollar are headed next.

Please note Wednesday's update has just been published, hower the article below contains unique forecasts that are very much still relevant.

Here are today's conversion rates:

• The British pound to euro exchange rate conversion: 1.1761
• The British Pound to US dollar exchange rate conversion: 1.329
• The Euro to US Dollar exchange rate conversion: 1.2681.

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Forecasts for Pound to Dollar: Sideways?

Nick Bate at Bank of America Merrill Lynch has just furnished us with the following predictions:

"Following this recent move, we would expect cable to settle into a holding pattern, particularly given that our own proprietary indicators suggest the speculative community has liquidated a large part of its GBP longs already.

"In our view, the case for renewed outperformance of GBP versus the European currencies (EUR and CHF in particular) remains a compelling one as the policy divergences between the BoE and its European counterparts continues to widen.

"We forecast EUR/GBP to be 0.77 and GBP/USD to be 1.62 by year-end."

Turning the equation around into pound to euro, the forecast is 1.2987.

Emmanuel Ng at OCBC Bank reckons GBP/USD could yet break lower through 1.6:

"August industrial production numbers are on tap today while we note that the disappointing string of PMI readings at the end of last week may not inspire outsized or lasting confidence in the UK economy. We'd prefer to stay heavy on the pair although a breach of 1.6000 may remain on the sidelines if the dollar dynamic continues to pause."

Forecasts for Pound to Euro: 1.3 Ahead?

Please see above paragraph for the Bank of America year-end view on GBP/EUR.

Bill McNamara at Charles Stanley is a little more optimistic in his pound euro rate target:

"The UK currency has run into selling pressures once again as it tests resistance in the region of 1.285 (i.e. the intermediate peak from 2012) although the broader technical picture is still suggesting that this is likely to be a temporary phenomenon.

"Given the divergent monetary policies in the two areas it cannot be too long before sterling is back above 1.30."

Forecasts for the euro dollar rate

Turning to the euro dollar exchange rate (EUR/USD) there is no shortage of analysts lining up to pour down more negativity.

Despite the negativity it is worth noting that the pair is showing some resillience at the time, as noted by Emmanuel Ng at OCBC Bank:

"The EUR-USD ignored disappointing August German factory orders (-5.7% yoy) but depressed Bund yields may see EUR gains remain somewhat transient beyond the short term.

"In the interim, our view remains unchanged and the pair may at tempt to clutch at the 1.2600 handle after its recent slide and with the ECB failing to incite additional dovishness last week."

Can Anyone Stop the Dollar?

The dollar exchange rate complex's rise through recent weeks has been quite incredible.

Last week the U.S. dollar racked up a record 12th week of gains against a basket of its major rivals, a streak that goes back nearly four decades since the currency first floated.

According to McNamara, there could be more gains to come:

"The inexorable rise in the dollar continues and last week’s 1.22% gained marked the twelfth successive rise of the Dollar Index, the longest winning sequence since it was created in 1971.

"This strength has left it looking hyperbolically overbought – its 14-day RSI has surged to a reading of 86.7% - but the fact that the Fed is moving towards tightening monetary policy when the ECB and Bank of Japan are still looking at doing the opposite makes it clear why demand for the US currency remains so strong.

"Some kind of minor pull-back is possible at any time but the chart is still indicating that the 2010 peak, at 88.7, will be tested before too long."