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Pound is at very top but what’s next. GBP/USD forecast

Commentaries & Views

The pound in the last months has been as cool as Britpop in the nineties. In other words, the GBP has experienced significant growth compared to other major currencies. But any increase ends sooner or later. However, every upward trend eventually comes to an end. Let us delve into whether the pound will continue to rise or if this period of short-term growth is nearing its conclusion.

To gain insights into recent developments, we need to examine the British Pound Currency Index chart. Additionally, one must remember that various factors affect the Forex, stock, crypto and other markets. Utilizing the economic calendar can assist in predicting future changes by providing data on key (and lesser-known) global events.

A six percent increase against other major currencies is substantial. It means that the pound has been one of the most robust currencies worldwide during this period. But what about the US dollar? Has it performed better than other major currencies?

Now we see this is about the British pound, the hero in the spotlight. The GBP has reached such results at a time when the United Kingdom shows less-than-stellar economic stats. The key here is the inflation rate, which has fluctuated between 10.4% and 8.7% in 2023. These’re pretty significant numbers.

That’s why investors expect the Bank of England to maintain a hawkish policy to damp down the inflation. In May, the BoE has already hiked the interest rate from 4.25% to 4.5%, and experts are sure that we should expect several more increases during the summer months. It could potentially reach 5% or 5.25%.

The pound’s exchange rate has been bolstered by these expectations. Each subsequent interest rate hike by the BoE is expected to contribute to further achievements for the GBP. Therefore, experts believe that the pound might become even more expensive in the near future.

But what lies beyond the near future? It may be challenging to forecast the GBP/USD currency pair movements at the end of 2023. Both the Bank of England and the Federal Reserve are likely to conclude their cycles of interest rate hikes. Simultaneously, the economies of both countries probably won’t be in a favorable state – worsening of economic balances and other metrics might lead to decreasing for the pound as well as for the US dollar. The question here is which currency – the GBP or the USD – will face a more adverse economic environment and  where terms like "recession" may become more realistic.

Depending on these events, the GBP/USD rate might range from 1.25 to 1.19 or 1.30, or might remain unchanged. There are many factors that may affect the balance within this currency pair. To be closer to successful forecasts and profitable trades, you need to do your own analysis. This principle is crucial for every successful investor and trader.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.