Multiple bullish stimuli, Goldman Sachs raises GBP/EUR and USD forecast!
Due to the sustained resilience of the UK economy and a reassessment of the outlook for the US dollar, Goldman Sachs' foreign exchange analysts have raised their forecast for the pound.
Kamakshya Trivedi, an analyst at Goldman Sachs in London, said, "Currently, the support for the pound comes from its risk beta, strong growth momentum, and patient Bank of England
The Bank of England voted 8-1 last week to keep interest rates unchanged and confirmed that gradual rate cuts are appropriate.
Goldman Sachs stated that additional support comes from an active global stock market background, traditionally supporting the GBP/USD and GBP/EUR exchange rates.
The Federal Reserve cut interest rates by 50 basis points last week, reducing the likelihood of a US economic recession and boosting global investor sentiment.
Trivedi stated that there is a risk of the Federal Reserve being too timid and not fulfilling enough, which could boost the US dollar.
Trivedi also stated, "The market has already digested the risk of a US economic recession, benefiting risk assets and countercyclical currencies such as the pound. Assuming that US economic growth continues to outperform the market and the Federal Reserve continues to rapidly relax monetary policy, this pattern should support further appreciation of the pound
He added, "From some indicators, the long position in the pound looks a bit tight, but we believe that when the broader pro cyclical background drives the uptrend and may maintain support, this is not enough to create enough resistance
Goldman Sachs has raised its year-end forecast for GBP/USD from 1.27 to 1.34, predicting GBP/EUR to end the year at 1.22 (i.e. EUR/GBP 0.8197).
Daily chart of GBP/USD
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