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.
The Pound US Dollar (GBP/USD) exchange rate accelerated on Tuesday amid reports US President Donald Trump may adopt a two-step approach to tariffs.At the time of writing GBP/USD was trading at around $1.2948.
Up roughly 0.2% from Tuesday’s opening levels.
US Dollar (USD) Slides on Tariff Report
The US Dollar (USD) came under pressure on Tuesday in response to a report by the Financial Times suggesting the White House is contemplating a two-step approach to implementing President Trump’s next round of tariffs.
The report suggests this strategy will see the immediate imposition of emergency duties while formal investigations into trading partners are conducted, raising money for tax cuts while laying the groundwork for a more ‘robust legal framework’.
USD exchange rates weakened as this was interpreted by markets as a potential moderation of Trump’s plans to impose reciprocal tariffs next week.
Adding to the pressure on the US dollar was the latest US consumer confidence figures.
Weak consumer sentiment has been a key driver behind recent US recession fears, so this month’s larger-than-expected drop in confidence looks to reignite these concerns.
Pound (GBP) Subdued ahead of UK Spring Statement
The Pound (GBP) traded sideways on Tuesday as GBP investors were reluctant to make any aggressive bets ahead of the unveiling of Chancellor Rachel Reeves’s Spring Statement on Wednesday.
In addition to publishing the latest forecasts from the Office for Budget Responsibility (OBR) and updating the government’s economic outlook, Reeves is expected to unveil measures aimed at appeasing UK bond market investors.
To prevent another spike in borrowing costs like we saw at the start of the year, the Chancellor is expected to introduce new spending cuts to prove the government is committed to fiscal discipline.
However, if Reeves’s spending cuts are seen as undermining the UK’s growth potential, it may have a negative impact on Sterling
GBP/USD Exchange Rate Forecast: UK Inflation Also in the Spotlight
Looking ahead, the UK’s Spring Statement is likely to act as a key catalyst of movement for the Pound to US Dollar exchange rate on Wednesday.
However, ahead of Reeves’s statement, Sterling sentiment is also likely to be influenced by the UK’s latest consumer price index.
Economists forecast the CPI figures will report a modest cooling of inflation in February.
This could apply some pressure to the Pound if GBP investors see it as increasing the chances of the Bank of England (BoE) delivering another interest rate cut in May.
Meanwhile, the focus for USD investors on Wednesday is likely to be the latest US durable goods orders figures.
If order growth slumped as expected last month, it’s likely to apply pressure to the US Dollar.
This content was originally published on ExchangeRates.org.uk