GBP/USD is back above the 1.22 level, marking a significant recovery after a period of weakness. Economists at Scotiabank expect the GBP to maintain its momentum and test the 1.2290/00 level. The sentiment towards the GBP has improved in recent weeks, with the currency benefiting from several factors, including a more stable political outlook in the UK and progress in Brexit negotiations.
There are several reasons why the GBP has been able to retain a firm undertone in the market. Firstly, the UK government has taken steps to provide clarity on its Brexit strategy, which has helped to reduce uncertainty and support the currency. Secondly, the Bank of England has recently indicated that it may raise interest rates sooner than previously predicted, which has spurred demand for the GBP. Investors are betting that a rate hike would improve the economic outlook for the UK and boost the GBP’s appeal.
In addition, the market is also taking note of the improved economic data from the UK. Recent figures have shown that the UK’s economic performance has been stronger than expected, highlighting the resilience of the UK economy. This has helped to boost confidence in the GBP and is a positive sign for the future.
Scotiabank experts believe that the GBP’s recent momentum is set to continue, with the currency likely to test the 1.2290/00 level in the near term. They note that the Pound has been able to find solid support on significant dips, which bodes well for its future prospects. With the GBP having a good chance of extending gains through the 55-Day Moving Average, it appears to be well positioned for further upside.
There are, of course, risks to this bullish outlook. The ongoing Brexit negotiations could still come unstuck, which would dent sentiment towards the GBP. In addition, the global economic outlook remains uncertain, with concerns about a potential recession and geopolitical risks such as the US-China trade dispute. These factors could weigh on the GBP and limit its potential for further gains.
Nevertheless, the current positive trend is encouraging for GBP investors, who will be hoping that this is a sign of things to come. The outlook for the UK economy remains broadly positive, with the Bank of England forecasting growth of around 2% this year. If the UK can maintain this level of economic performance, it will provide a solid foundation for the GBP to build on.
Overall, the Scotiabank economists’ forecast of the GBP testing the 1.2290/00 level appears to be well-founded. The factors supporting the GBP’s recent gains are likely to remain in place for the foreseeable future, and if the currency can maintain its momentum, there is a good chance that it will continue to rise against the USD. Nonetheless, investors should remain vigilant and keep an eye on any potential risks that could alter the GBP’s outlook.
