GBP/USD Forecast: GBP/USD Rate Finally Halts Seven Week Losing Streak

However, signs are emerging that the pound sterling could be about to put an end to what has become a rather protracted losing streak against the dollar.

At the end of August we see the British pound to US dollar exchange rate (GBP/USD) is at 1.6600.

Long-suffering GBP bulls will welcome the current move higher, as noted by Bill McNamara at Charles Stanley:

"The pound has now lost ground against the dollar for the seventh week in a row and last week’s 0.72% decline took it to its lowest reading since April. This slide leaves it looking oversold but the chart is still pointing towards further weakness."

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Sterling Dollar Rate Undervalued Warn JPMorgan

A recent forex analysis issued by one of the major banks we follow has caught our attention today.

As mentioned, the USD has dominated proceedings for a number of weeks now, but were you to listen to the team at JPMorgan then you would get the sense that this is a rather attractive dip within which to stock up on GBP ahead of a recovery.

"With sterling, the currency is underperforming on a short-term softening in activity and inflation data but there is no change to our call for a Q1 2015 hike. So the forecast is unchanged but the near-term trading strategy is short the currency going into the wildcard of the Scottish referendum," says a note from JPMorgan.

The pound dollar rate is forecast for 1.71 by September 2014 - we note this is rather optimistic if we consider where the currency is.

However, valuations for 1.67 in December and 1.68 in March 2015 appear to be within reach and we see these as potentially viable touching points going forward.

Markets Increasingly Negative on the Euro

Turning to the euro we note the outlook remains biased towards the negative side.

News flow has been fairly limited this week but markets appear increasingly confidence to add to shorts ahead of the ECB policy announcement next week.

Also worrying traders is the potential for a weak print for the eurozone August flash CPI on Friday which should add to the selling pressure.

"Our technical strategist suggests that EURUSD faces a clear path forward towards the September 2013 level of 1.3106 and possibly overshooting towards the 1.3050-76 area," says a currency note from BNP Paribas.

Furthermore, "the latest update of BNP Paribas Positioning Analysis shows that short positioning is substantial but not yet extreme (-20 on our scale of -50 to +50), and should not in our view be a significant obstacle to further EUR weakness at the moment."