Dollar Rally Could Be Over, GBP/USD Seen at Start of Consolidative Phase

However, what can we expect when it comes to direction for the GBP to USD exchange rate?

We have seen the GBP consolidate after weeks of decline; can this consolidation persist or will we soon see a resumption of selling pressures? We hear from a number of currency analysts as to where the rate could be headed next.

Where is the GBP/USD Now?

At the time of this article's latest updated we see the British pound to dollar exchange rate trading at 1.6221.

Please note that all FX rates are from the wholesale markets - your bank will affix a spread to the rate to derive profit. However, an independent FX provider will undercut your bank's offer, this can deliver up to 5% more currency in some instances.

Swissquote See Start of a Period of Consolidation

The relentless decline in the GBP/USD appears to have ceased for now, and according to the technical forecasters at Swissquote we will see more sideways movement for now:

"GBP/USD has broken its short-term rising trendline, favouring a corrective phase towards the support at 1.6162 (16/09/2014 low). A break of the hourly support at 1.6285 would confirm this scenario. An hourly resistance lies at 1.6416, while a key resistance stands at 1.6525.

"In the longer term, the collapse in prices after having reached 4-year highs has created a strong resistance at 1.7192, which is unlikely to be broken in the coming months. Monitor the recent rebound as it could signal the start of a medium-term consolidation phase."

Pound Set to Benefit as Scottish Referendum Falls Away

The biggest risk to the pound sterling in 2014 has now fallen away - the breakup of the United Kingdom was a real possibility in September; and volatility in the GBP proves markets were uncomfortable with such an eventuality.

Now that the referendum has passed forex markets will turn their focus back to UK economic performance and the Bank of England's interest rate policy.

"Uncertainties about the Scottish referendum have passed and we expect the focus in the case of GBP to return to rate differentials. In that context, yield spreads are moving in favour of higher GBP," say Morgan Stanley.

Markets are currently expecting an interest rate hike in early 2015 - if economic data releases come in better than expected this October then expect markets to pick up more sterling in anticipation of the move.

The October PMI series will be closely watched and kick off on Wednesday the 1st of October with the release of Markit's Manufacturing PMI.