Goldman Sachs predicts the Pound Sterling will reach 1.35 to the US Dollar by 2024, while HSBC predicts a decline to 1.18 by the third quarter of 2024.
Currently GBP/USD is experiencing volatile trading, rising above 1.2700 due to the depreciation of the dollar. Recently published UK data has changed Bank of England interest rate expectations perhaps earlier, but the Pound is supported by a weaker US dollar and better risk conditions in global markets.
The UK's headline inflation rate fell to 3.9% in November, prompting markets to expect faster and more aggressive interest rate cuts. MUFG is targeting a significant drop in UK inflation, in line with trends in the US and the eurozone.
Latest chart of GBP/USD within a year
Additionally, RBC Capital Markets highlighted potential challenges to the BoE's hawkish stance after the CPI announcement.
Rabobank expects the UK may experience stagflation amid a slowing economy.
In a statement BNP Paribas predicted more prolonged dollar weakness due to the expectation of a large Fed interest rate cut in 2024.
Based on current market sentiment, this has Goldman Sachs predicting five interest rate cuts in 2024, strengthening GBP/USD to 1.35.
US data in the first quarter of 2024 is a very important indication and is the focus of many. HSBC remained cautious, citing continued weakness in the US dollar amid global uncertainty. MUFG warned of potential dollar oversold as markets assess the Fed's earlier and deeper rate cut recommendations.
