GBP/USD: Renewed downside pressure ahead for the pound – Wells Fargo
|Taking into account that the Bank of England’s tightening is set to lag the Federal Reserve and fall short of market expectations, analysts at Wells Fargo expect renewed downside in the pound. They see the GBP/USD pair falling to 1.1200 or below by late 2022/early 2023.
Key Quotes:
“Our outlook for Bank of England rate hikes contrasts with the more aggressive path of tightening expected by the Federal Reserve. It also falls well short of rate hikes currently priced into markets, which anticipate a peak in the Bank of England's policy rate near 4.50% around the middle of 2023. As the Bank of England lags the Fed and falls short of market expectations, we expect the GBP/USD exchange rate to come under renewed pressure, falling to $1.1200 or below by late 2022/early 2023.”
“As the U.S. economy also falls into recession and the Fed reaches the end of its tightening cycle we expect some rebound in the pound, though with the U.K. facing its own economic challenges that rebound should be modest, We forecast a GBP/USD exchange rate of $1.1500 by the end of 2023.”
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