ExchangeRates.org.uk - The Pound to Dollar (GBP/USD) exchange rate dipped to 6-month lows below 1.2500 in November before a recovery to around 1.2650.Danske maintains a bullish stance on the dollar over the longer term with the risk of GBP/USD losses, but does see scope for a significant shorter-term US setback.
In this context, it sees scope for GBP/USD to strengthen to 1.33 on a 1-3 month view.
Looking at the immediate outlook for monetary policy, Danske expects that the Fed will cut rates in December while the Bank of England is set to keep rates at 4.75% which will help underpin the Pound.
The bank also expects the latest US jobs report will be on the soft side with downside risks for US growth undermining the dollar.
The bank also considers that the US currency is overbought on a short-term view with the risk of significant position liquidation, especially with seasonal trends tending to undermine the US currency.
On the UK side, Danske expects that the Pound will benefit from a cautious Bank of England stance with the central bank taking note of stubborn inflation and firm consumer spending.
Danske also expects the Pound will be relatively insulated from the threat of US tariffs.
This content was originally published on ExchangeRates.org.uk