British Pound forecasts and outlook from Lloyds Bank: Gains versus EUR, losses versus USD

Today has been a good day for the British pound, the pound euro exchange rate is 0.36 pct higher at 1.1796.
The pound dollar rate is 0.05 pct higher at 1.5653.

Please be aware that the above quotes are wholesale - your bank will affix their own discretionary spread. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please find out more here.

As we can see, the pound has enjoyed a decent day on the currency markets today owing largely to today's employment data - the question is can the momentum continue?

Commenting on the outlook for the pound sterling, Lloyds Bank say:

"Since hitting a low of $1.50 in late May, GBP/USD has risen back above $1.55. The move primarily reflected the recent weakness of the US currency against most of the majors. Sterling has also been supported, however, by hopes of domestic recovery.

"The latest PMIs suggest the 0.3% rise in UK Q1 GDP is likely to be sustained into Q2. Amid the improvement in economic data, expectations of further UK policy stimulus have been scaled back. The MPC kept policy on hold for the fifth consecutive month in June, with all eyes now on Mark Carney’s arrival as BoE Governor in July.

"Against the euro, sterling is currently trading around the top of its recent €1.16 to €1.18 range. Looking ahead, we expect GBP/EUR to pick up towards 1.20 by the end of the year, but look for sterling to come under renewed downward pressure against the US dollar, as relative growth and policy differentials move in the US’s favour."

To see a breakdown of the numbers please see the exchange rate table here.

For GBP, a lot can still go wrong

Meanwhile, also landing on our desk is a decidedly negative note on the outlook for sterling from Stephen Gallo, European Head of FX Strategy at BMO Capital Markets today:

"Despite the perceptions of structural success for the UK over the last decade or more, the economy’s over-reliance on the financial services sector, its public and private sector debt burdens, household deleveraging, its balance of payments deficit and policy complications stemming from its floating nominal exchange rate all suggest that a lot can still go wrong.

"We believe that the balance of factors will lead to a modest GBP depreciation over the next year, whilst stale short positioning and a reigniting of credit channels and asset appreciation should remain important upside risks.

"Additional BoE QE injections still for now appear to be a more distant, last-resort option for policy makers given the BoE’s new powers."