ExchangeRates.org.uk - The Pound to Dollar (GBP/USD) exchange rate has consolidated below 1.3000 as the dollar has managed to stem losses in global markets with the near-term market focus likely to be on the Trump Administration trade policies. Credit Agricole (EPA:CAGR) has lowered its dollar forecasts across the board amid increased doubts over the US economic outlook.
Although the bank is lukewarm over the UK economic and pound prospects, the GBP/USD forecast has been increased to 1.36 from 1.30 previously.
Credit Agricole is sticking to its view that the overvalued dollar and dovish Fed outlook will limit the potential for currency support from trade tariffs.
The bank also considers that it has underestimated the extent to which Administration policies on layoffs and deportations will damage the growth outlook.
In this context, the bank has downgraded its dollar forecasts throughout the forecast period.
Over the medium term, Credit Agricole also sees potential efforts to undermine Fed independence will hurt the US currency.
The bank also notes the risk of an accord to weaken the US currency.
Credit Agricole is not enthusiastic over the Pound outlook, especially given that recent UK economic data has been weaker than expected.
The bank also considers the risk of selling in UK bonds if the forthcoming budget fails to underpin medium-term confidence.
The Pound to Dollar (GBP/USD) exchange rate has consolidated just below 1.3000 after failing to hold above this level.ANZ expects that GBP/USD will slide to 1.22 by the end of the second quarter amid global damage from US tariffs and a more aggressive Bank of England (BoE) policy stance.
The bank does, however, expect a recovery to 1.28 by year end and a less confrontational US tariff stance could negate the 1.22 forecast.
The market consensus at this stage is that the BoE will cut rates twice over the remainder of 2025, but ANZ expects four cuts which would take the base rate down to 3.50%.
In contrast, the bank expects that the Federal Reserve will cut rates twice, undermining the Pound on yield grounds.
Although ANZ expects that the UK will not be a direct target for tariffs, the bank does expect that the Pound will be vulnerable if there is a wider slide in risk appetite.
The bank does note the high degree of uncertainty surrounding both tariffs and the wider economic outlook.
It notes that dollar sentiment has weakened significantly and, if the US Administration takes a more moderate stance on tariffs, the dollar is liable to lose ground.
This content was originally published on ExchangeRates.org.uk