GBP/USD: The rise will be modest – Nomura

On Thursday, BoE’s retaining a hawkish stance led Cable higher. Economists at Nomura analyze GBP/USD outlook.

Cable seen at 1.27 and 1.28 in Q1 and Q2 2024, respectively

Stronger GBP was no doubt led by the BoE’s announcement; however, the softening in USD has been the driver over the past few sessions. The market has continued to unwind its long USD exposure.

We believe this softer USD trend will become more apparent going forward, and this will help raise GBP/USD. That said, we do not expect economic growth in the UK for the next few quarters to be as resilient as in the US, and as a result, sluggish growth in the UK is likely to be a drag on GBP. Therefore, on net, we think the rise in GBP/USD will be modest, and expect 1.27 and 1.28 in Q1 and Q2 2024, respectively.