In recent days, the British pound has lost momentum against the U.S. dollar after a week of gains. The dollar strengthened following the announcement of a 3% year-on-year expansion in U.S. economic activity for the second quarter of 2024.
Pound Stalls Against the Dollar
Market analyst Alex Rudolph from IG noted that “GBP/USD remains sidelined around its $1.3412 low from September 2022, where it ran out of steam, as expected.” He added that if this level is surpassed, the focus will shift to the $1.3515 peak from December 2019. Conversely, support is expected at the $1.3267 high from August.
Despite this, the pound (GBPEUR=X) has made gains against the euro, currently trading at 1.2009.
Barclays Remains Bullish on the Pound
Barclays has reaffirmed its bullish outlook for the pound, maintaining its “long GBP exposure versus the EUR” following last week’s Bank of England (BoE) Monetary Policy Committee (MPC) meeting. The bank emphasized that the BoE’s “hawkish hold” is a crucial factor driving demand for the pound. The central bank decided to keep interest rates unchanged but hinted at the possibility of future tightening.
Barclays pointed out that this commitment to controlling inflation—despite signs of slowing price growth and resilient economic activity—sets the BoE apart from other major central banks, which are approaching the end of their rate-hiking cycles.
According to Barclays, this stance provides the pound with a “carry advantage,” making it attractive to investors seeking higher returns. The bank also expects a “slow and relatively shallow cutting cycle” in the future, indicating that any potential rate cuts will be gradual, further supporting the currency.
Conclusion
As economic indicators influence currency and commodity markets, the performance of the pound against the dollar and euro remains a key focus for investors. Barclays’ bullish stance, coupled with the BoE’s monetary policy approach, may offer continued support for the pound in the coming weeks.
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