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GBP/USD forecast for 06.08.2020

August 6, 2020

August 6, 2020

GBP/USD forecast: Pound lands experts in the soupDmitri Demidenko

Fundamental Pound forecast for today

The market is too often wrong about the sterling

Brexit put the Bank of England in the shade. The central bank was even criticized when Mark Carney and his colleagues lowered the interest rates immediately after the referendum on the UK membership in the EU in 2016. The BoE had to again raise the rates amid the inflation growth. The pandemic, however, gave the regulator the primary role again. The recession makes the world’s central banks according to the same pattern. They aggressively ease monetary policy and watch how the economy responds, and, in case of necessity, boost the monetary stimulus. These actions affect the exchange rates of local currencies. The GBP is no exception.

At the BoE August meeting,  Andrew Bailey and his colleagues admitted that the GDP drop was not as deep as it had been expected (-20% compared to -25% in the previous forecast for the second quarter). However, the GDP rate should return to the levels of 2019 not in the second half of 2021 but at the end of next year. The Bank of England is optimistic about the UK labor market, expecting the rise in the unemployment rate to 7.5% at the end of 2020, followed by a decline next year. The BoE officials sound cautious rather than pessimistic. Markets expected a more negative tone, that should hint at the interest rate cut or the expansion of the asset purchase program.

Market expectations of the changes in the BoE interest rates

![LiteForex: GBP/USD forecast for 06.08.2020][1]

Source: Bloomberg

I must admit the market’s bets are too often wrong about the sterling trends. So, I doubt the forecasts of 60 analysts polled by Reuters that suggest the [GBP/USD][2] be at 1.29 in 3 months and 1.28 in 6 months, followed by the return to a level of 1.31 in a year. Experts bet on the fear of a no-deal Brexit and the weakness of the UK economy. In my opinion, everything is relative.

The Bank of England expects the UK economy to recover at the end of 2021. However, Fed Vice Chairman Richard Clarida suggests the same term for the US economic recovery. The UK is thought to be the most affected by COVID-19 country in Europe. Analysts warn about the second wave of the pandemic. But the epidemiological situation in the U.S. is not better. Yes, the problems with the Brexit talks should weigh in the sterling, but the dollar is also pressed down by political issues. There is the presidential election upcoming in the USA. So, the USA does not have any advantages over the UK and is sometimes behind Britain. Therefore, I suggest the [GBP/USD][2] uptrend should be strong.

However, the pound bears still hope to win back. BofA Merrill Lynch says the pound trend should soon turn down, as the GBP bears are supported by….seasonal factor. In 4 out of 5 last months of the year, the sterling was more often down than up. I don’t think it is a strong reason. The US weak jobs report for July may send the US stock indexes down and return the dollar its safe-haven status. In this case, I would sell the [GBP/JPY][3] with the target at 137 and use the [GBP/USD][2] correction down to 1.302, 1.296, and 1.289 to enter long-term buy positions. The [LiteForex convenient services][4] will perfectly suit to trade this strategy.

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Price chart of GBPUSD in real time mode

![GBP/USD forecast: Pound lands experts in the soup][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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