ING weighs in on the future prospects of the GBP/USD currency pair, sharing insights on its trajectory influenced by the Bank of England's monetary policy and global inflationary pressures.
BoE's Monetary Policy: ING mentions that the Bank of England (BoE) is leaving open the possibility for additional tightening. Presently, the market predicts the peak rate to reach 5.75%.
Forecast for September: ING's economic team anticipates that the BoE might increase the rates by another 25 basis points to 5.50% in September. However, this might signal the end of the tightening cycle if inflationary pressures begin to decrease.
GBP/EUR Outlook: As a result of the above dynamics, ING sees potential for a bounce in the EUR/GBP pair, targeting the 0.87-0.88 range by the close of the year.
USD Factor: ING holds the view that the US dollar will lose some ground towards the end of 2023. This anticipated weakness in the USD, paired with the dynamics in the UK, suggests that the GBP/USD (often referred to as "Cable") could rise above the 1.30 mark in the final quarter of the year.
ING projects that the GBP/USD will surpass the 1.30 level by year-end. This forecast stems from a combination of the Bank of England's likely monetary stance and the anticipated decline of the US dollar later in the year.