Source: Forex Analysis
The British currency strengthened against the US dollar for the second consecutive day. The GBP/USD pair rebounded from multi-month lows, breaking the psychological mark of 1.25 amid statements by the head of the Federal Reserve (FED) Jerome Powell, perceived by the market as a signal of the regulator’s readiness to relax monetary policy.
However, the joy of “bulls” on the pound may be short-lived, since the achievements of the sterling are mainly due to the weakness of the greenback.
“Despite the local improvement of the technical picture, which implies some potential for the recovery of GBP/USD, you should not count on the stability of the upward movement,” strategists at Royal Bank of Canada (RBC) said.
They revised their forecast for the Bank of England rate and no longer expect it to increase in the first quarter of 2020.
The RBC expects that in light of the weak growth of the country’s economy and the continued risks of a hard Brexit, the central bank is likely to cut its rate by 25 basis points this November.
“The coming months will be a period of heightened volatility for the pound, given the possibility of holding early Parliamentary elections in the United Kingdom and a new chapter in the divorce process of Great Britain and the EU, which should be completed before October 31,” analysts said.
“It is possible that by the end of the year GBP/USD will return to the level of 1.30 amid easing of the Fed’s monetary rate and reducing uncertainty in the UK, but the potential risk/reward ratio does not give reason to talk about the attractiveness of long positions in the pound,” they added.
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