GBP/USD: Medium term range between 1.20 and 1.28 – Lloyds Bank

Analysts at Lloyds Bank explain that recently, sterling has been amongst the best performing developed market currencies, although GBP/USD remains within its medium term range between 1.20 and 1.28.

Key Quotes

“Prior to March’s FOMC meeting, upbeat Fedspeak pressured GBP/USD down towards 1.21. However, the ‘dovish’ hike from the Federal Reserve, combined with the more ‘hawkish’ outcome from last month’s MPC meeting, drove the currency pair back above 1.26. There was relatively little reaction to Nicola Sturgeon’s decision to seek a second independence referendum from Westminster, nor UK PM Theresa May decision to trigger Article 50.”

“Looking ahead, the start of EU exit negotiations may limit the upside in the near term. Nonetheless, we believe there is scope for GBP/USD to benefit from a further softening of the US dollar, most likely in response to a further scaling back in US stimulus prospects. As such, we forecast the currency pair to move towards 1.30 by end-2017. However, ongoing economic and political event risk leaves the pair vulnerable to bouts of significant volatility.”