GBP/USD to drop back to 1.2500 on a three-month view but to edge higher to 1.3000 in H2 – Rabobank

Despite the impulse of the Federal Reserve (Fed) and the Bank of England (BoE) meetings, GBP/USD is currently trading very little changed from its levels 24 hours ago. Economists at Rabobank analyze Cable’s outlook.

The BoE rate will remain on hold until September

In our view, the first Fed rate cut of the cycle is more likely in June. This suggests the risk of further USD upside on a one-to-three-month view.

In our view, the BoE rate will remain on hold until September reflecting relatively higher levels of UK inflation. 

We see potential for Cable to drop back to 1.2500 on a three-month view but to edge higher to 1.3000 in H2 as the Fed rate cutting cycle progresses.