GBP/USD Rate: Sell the Rally or Buy the Dip? - Two Opposite Views on the GBP/USD Exchange Rate

For your reference at the present time the British pound to dollar exchange rate (GBP/USD) is at 1.6572.

If you are holding out for better exchange rates then don't hesistate, ensure your FX provider has the relevant buy order in place for when your rate is achieved. Likewise, if there is a threshold you are not willing to cross to the downside ensure stop-loss orders are in place. Please learn more here.

The Negative Forecast: Soc Gen

Societe Generale have today told clients that they should see through any near-term strength in the GBP and sell it when given the opportunity.

Analysts at the bank reckon:

 "In both the US and the UK, a hawkish minority was more vocal at the last meeting but the majority view prevailed. In both cases, they look like outliers rather than thought-leaders. However, the market pricing is very different and the hawkish tone to the FOMC Minutes had a more positive impact on the dollar, than the UK MPC Minutes did for sterling," answers SocGen.

"That’s because the debate about UK monetary policy is still centred on whether rates rise in late 2014 or early 2015. As yet, there hasn’t been much debate of rates being on hold until, say, after the election next May. The Minutes didn’t change the debate much; sterling rallied a bit but failed to break any GBP/USD levels," SocGen clarifies.

"By contrast, the market position with regards to the FOMC is to expect dovishness, so even a minor change in language can have more of an impact. Today, for example, the overwhelming consensus is that Fed Chair Janet Yellen will be dovish when she addresses the Jackson Hole conference.

"That seems likely but it exposes the market bias. If we see GBP/USD edge up, it’s worth selling into the rally."

The Positive Foreast: Crédit Agricole CIB

Adam Myers, Senior FX Strategist at Crédit Agricole CIB tells his clients that any weakness in the GBP is ultimately bound to be short-lived and represents a chance to buy:

"Against expectations, according to the latest minutes two MPC members voted in favour of a rate hike at the August meeting. It must be noted that some central bank members regard the fall in the unemployment rate as a more important indicator of the degree of slack as compared to wage growth. Given firm business activity we expect further improving labour market conditions.

"This in turn suggests there is limited room of falling BoE rate expectations from the current levels. Considering that the past few week’s GBP correction was driven by falling investors’ central bank monetary policy expectations, there now appears limited scope of the currency depreciating further.

"Accordingly we stick to the view that the past few weeks’ downside was corrective rather than a change in trend. Hence we remain in favour of buying GBP dips, for instance against the JPY."