Outlook for the pound vs US dollar exchange rate: Momentum returns to the USD

The US dollar (Currency:USD) is forecasted to make a comeback after a poor late summer / early Autumn period.

Last week we reported on a number of views warning of a strengthening USD; this morning morning we have received further exchange rate outlook notes concerning this trend.

UniCredit Bank tell us they are forecasting the pound to US dollar exchange rate to plumb as low as 1.57:
"Sterling has come under severe pressure lately and we expect this to continue in the short term. The 2Y swap differential (between the UK and the US) has narrowed from 42bp to around 36bp, and as a result our short-term fair-value model points to a correction towards the 1.55 level. We maintain our year-end forecast of 1.57."

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The US Dollar has rallied over the past week, in part due to the weaker EUR, but also the USD has shown some resilience to weak US data while responding positively to the stronger data at the end of last week.

The USD has staged a modest recovery across the board; "however a further squaring of USD short positions may be necessary before we see renewed USD weakness," say Lloyds Bank Research in an exchange rate outlook note to clients.

The return of the US dollar's strength has seen GBPUSD hit 1.5904 – its lowest level since October 16th.

"The upside has been capped by the 50-day moving average (1.5948) and the pair consolidates levels below the uptrend channel bottom line," says a morning note from Swissquote Bank.