April 17, 2025 – Written by David Woodsmith
STORY LINK GBP/USD Forecast: Pound Looks to be Overbought Against Dollar
After hitting 6-month highs close to 1.3300, the Pound to Dollar exchange rate dipped to test 1.3200 before rebounding to 1.3240.
US equities posted sharp losses on Wednesday before a tentative rebound in futures on Thursday.
Scotiabank noted that the Pound is looking overbought but added; “We look to near-term resistance around 1.33, and beyond that, the September high around 1.34. Near-term support is expected between 1.3220 and 1.32.”
Although the dollar has managed to crawl away from 3-year lows, underlying confidence remains weak with the currency undermined by a fresh slide in US equities with the S&P 500 index sliding 2.2% on Wednesday. The currency index (DXY) was held below 100.
After Wednesday’s European close, Fed Chair Powell stated that the Administration had been more aggressive than expected in imposing tariffs.
He warned that the economy was liable to be weaker and inflation higher which would complicate the task in setting policy.
According to Powell; “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
His rhetoric was more hawkish than comments from Governor Waller earlier in the week.
Powell again considered that the central bank needed to be patient and there was no case for making any quick judgement on interest rates.
ING commented; “In normal market conditions, Powell’s hawkishness would have triggered a positive USD response. But the greenback is still responding to the narrative of relative US assets underperformance and growth concerns, which are arguably being compounded by a hawkish Fed.”
ING added; “Despite plenty of indications that the dollar is oversold and undervalued, we don’t see a catalyst for a respite today. Should US equities underperform again, DXY should extend its drop below 99.0.
Citi played down the risk of a big structural move away from the dollar; “We do not think this is a proper de-dollarisation and see no real risk to the USD reserve currency status.”
It did, however, add; “However, the world is overweight U.S. assets. Ultimately this ‘sell America’ flow could severely weigh on the USD this year.”
Confidence surrounding trade talks will also be a key element.
On Wednesday, there were some reports that China was open to talks with the US, but there were important conditions and overnight the foreign ministry stated that China will pay no attention if the United States continues to play the “tariff numbers game.”
Charu Chanana, chief investment strategist at Saxo, said markets are detecting signs of hope in US-Japan trade talks.
She added; “When the bar is low, even talks about talks can lift markets as investors rotate from fear to hope.”
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TAGS: Pound Dollar Forecasts
