GBP/USD Exchange Rate: Where Next? The Pro’s Give Their Views

Pound sterling retains a positive bias on global foreign exchange markets with a halt in the advance of US real yields halting the broad-based dollar strength we have become increasingly familiar with.

At the same time, the British pound will see the support of pro-Remain polling data likely fade, which could have implications for the GBP/USD’s outlook from here.

At the time of writing the pound to dollar exchange rate is at 1.4728 while the dollar index is trading softer at 95.22.

Concerning the outlook, it would appear that while momentum is turning increasingly favourable for sterling, there are potential technical barriers which could end the now-protracted period of short covering action we have seen since late February.

There is also the fundamental question of what would happen were referendum polling numbers to shift back towards the Remain campaign.

Indeed, the most recent YouGov poll shows it is unlikely to be one-way traffic towards Remain going forward, and any trend towards Leave could well trigger notable market moves in GBP/USD.

YouGov report support for the Remain campaign is at 41 pct, down 3 pct since last week, with support for Leave up 1 point on 41 pct.

Indeed, this could be one reason why forecasts for 1.35 at Bank of America are not as outlandish as many would suggest in the current environment.

Confused, worried or have a strong hunch on where GBP / USD is headed next? Let the following opinions help you out:

EU referendum polls continue to be released confirming the lead of the Remain camp, seeing short Sterling positions being cut and the Pound continuing its squeeze higher.

The risk for the Pound (as so much of the event risk is being priced out so far away from the voting day) is any poll favouring a leave vote in the coming weeks could see a Brexit priced in very quickly and sharply.

  • Oliver Jones at Capital Economics

We expect the pound to fall against the dollar in the medium term, whatever the outcome of the EU referendum. Even if the pound recovers more lost ground on a vote to remain, any strength may well prove short-lived, as monetary policy starts to tighten even faster in the US than the UK relative to expectations.

We also expect sterling to stay fairly flat against the euro and to strengthen a little against the yen.

  • Robin Wilkin at Lloyds Bank:

“The broader USD and US bond yields have rallied to levels we believe express "fair value" with the information that we currently know. Fed members have re-ignited thoughts of a hike in the summer and now it is down to the data to prove whether this will be the case, or not.

“Previously, in similar situations Chair Yellen has dampened others’ enthusiasm. She speaks tomorrow.  We  can see a consolidation/pullback in the braoder USD, particularly the commodity currencies.

“With the broader USD looking set to develop a correction phase the risk is this rate could push up to test the 1.48-1.4950 key resistance region, after breaking 1.4675 yesterday.

“A drop back through 1.4575/50 is needed to negate this new near term bull dynamic and re-open the potential for a move back towards 1.4350/1.4300.      

“Medium-term we still believe the market should remain in a range between 1.4050/1.3980 (1.35 key below there) and the 1.48-1.4950 region. A move up through 1.50 is needed to suggest the 30-year support in the 1.40-1.35 has again held and technical analysis would look for a gradual move back towards the 1.60/1.65 over the longer term.”                                                                                          

  • CitiFX:

“An inverse head and shoulders formation seen yesterday with a neckline at 1.4650 (weekly close) on GBPUSD would suggest further gains to month-end next week though taking a more medium term view until the June 23rd EU referendum.

"The better technical picture is probably more a cue to continue to buy sterling on crosses rather than against USD with the EURGBP cross having now opened up a move to 0.7550 - the 50% retracement of the entire Nov’15 low – April’16 high (0.6981-0.8120).”

  • Quek Ser Leang at UOB:

“The ease of which last week’s 1.4663 top is taken out coupled with the strong daily closing has shifted the outlook to bullish
again.

“From here, we are targeting a break above the month’s high of 1.4770. The next resistance above this level is closer to 1.4890. Stop-loss is at 1.4550 even though 1.4625 is already a strong support.”