ExchangeRates.org.uk - The Pound to Dollar (GBP/USD) exchange rate has stalled around 1.2850 and ANZ sees downside risks in the near term amid increased speculation over an interest rate cut.
From a longer-term perspective, however, ANZ considers that dollar weakness will be crucial in propelling the Pound higher with a September 2025 forecast of 1.36. ANZ expects that the dollar will maintain a solid tone in the short term.
The bank now expects only two Federal Reserve rate cuts this year compared with a previous forecast of four which with overall yield spreads underpinning the US currency.
ANZ still expects more aggressive Fed policy easing next year which will undermine the dollar. As far as political considerations are concerned, the bank notes that a Trump victory in November’s Presidential election could support the dollar, especially on trade grounds, but considers that this by no means certain given the number of variables involved.
On the UK side, ANZ expects that the Bank of England will cut interest rates in August which will sap Pound support given that a cut is not fully priced in. It also expresses reservations surrounding the UK growth outlook while inflation is likely to weaken further in the short term as service-sector pressures ease.
This content was originally published on ExchangeRates.org.uk
