Pound to Dollar Rate’s Line in the Sand @ 1.40 Suggests Major Poll

The world’s top foreign exchange forecasting teams have said the GBP/USD exchange rate is unlikely to suffer major declines from present levels, all being equal.

The latest Reuters poll of the world’s top 45 currency research institutions shows the pound to be trading above 1.40 between now and the EU referendum.

The news will be a welcome tonic in a time of heightened currency volatility and apprehension surrounding the vote.

Forecasts for decline of up to 20% against the dollar and euro / pound exchange rate potentially trading at parity are the kind of forecasts that tend to stick in our minds.

However the polling data from Reuters confirms that theprobability of a Brexit remains below 50% amongst major currency researchers.

If the pound is at levels it will remain through the referendum then it suggests that the markets have found their sweet spot for pricing the pound.

It goes without saying though that should odds of a UK exit from the EU increase the forecasts for the British pound will have to be lowered accordingly.

The pound to dollar exchange rate is forecast to trade around $1.40 in a month's time and still be there in three months, just before the vote.

A year from now cable will be trading at $1.46.

Pollsters at Reuters confirm that these forecasts are all a cent or two weaker than predicted a month ago.

Make no mistake though, the risks to the forecasts remain poised to the downside, particularly in the wake of March’s PMI data releases.

The data came in well below expectations confirming the UK economy was stuttering as Brexit-inspired uncertainty made itself felt in the real economy.

The most notable impact of the data has been to increase talk about the potential for more voters on the Bank of England’s Monetary Policy Committee to start voting for interest rate cuts.

“With the services PMI historically having some predictive power in trailing changes in MPC policy sentiment, today’s report points to an increasing likelihood that some on the MPC – most likely Andy Haldane and Jan Vlieghe – may soon be tempted to vote for a cut in Bank Rate,” say Lloyds Bank in a foreign exchange note to clients.

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