GBP/USD to Weaken Towards the End of 2020 Over Brexit Uncertainties

GBP/USD to Weaken Towards the End of 2020 Over Brexit Uncertainties

Posted Friday, September 4, 2020 by
Arslan Butt • 1 min read

A recent Reuters poll indicates that the Sterling could lose some of its recent gains and weaken against the US dollar towards the end of the year as the transition period for Brexit comes to an end. GBP/USD is likely to turn bearish towards the year-end as a result of Brexit uncertainties even as the overall sentiment in markets remains weighed down by coronavirus pandemic and concerns about its economic impact.

Earlier this week, GBP/USD soared to the highest levels in eight months as a result of weakness in the dollar on the back of a more dovish than expected Fed. However, it has since reversed lower after policymakers at the BOE cautioned that the British economy could suffer even more than previously forecast due to the pandemic.

On Wednesday, BOE Deputy Governor Dave Ramsden warned that the coronavirus crisis could wipe off at least around 1.5% of Britain’s GDP permanently. Even though the BOE has followed several leading central banks into cutting interest rates to record lows and increasing bond purchase programs, the economy is yet to rebound after lockdown measures were lifted.

Economists polled have forecast that GBP/USD could slip to 1.31 in a month from now, from the current levels around 1.33. However, in a year from now, it could regain its strength and rise to around 1.34.

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