Brown Brothers Harriman analyst Elias Haddad warns the British pound is set to decline toward 1.3100 against the US dollar after surrendering gains triggered by recent US-Iran geopolitical tensions. The forecast reflects growing economic divergence between the two economies, with US growth momentum significantly outpacing the United Kingdom.
The GBP/USD pair has already reversed a portion of its safe-haven driven rally as geopolitical risk premiums fade from currency markets. BBH expects this downward trajectory to continue as fundamental economic data increasingly favors the dollar. The widening growth differential between the robust US economy and the struggling UK creates a bearish technical and fundamental backdrop for sterling.
Traders should monitor upcoming GDP releases and central bank commentary from both the Federal Reserve and Bank of England, as monetary policy expectations will likely amplify or dampen this projected move toward the 1.3100 level.
FXnCO Insight
Sterling longs should consider taking profits or hedging positions as the growth divergence trade reasserts itself following the temporary geopolitical bounce.
Source: FXStreet