Scotiabank economists predict a potential drop in the value of the pound sterling amidst the ongoing USD corrective rebound. Learn more about the possible factors contributing to this prediction.
Sterling May Face Further Correction
Economists at Scotiabank have suggested that the pound sterling (GBP) could potentially face further correction amidst the current corrective rebound in the US dollar (USD). The currency pair, often referred to as “cable” in the trading world, could potentially drop to the 1.2075/1.2125 range should it break under the 1.22 level, according to the economists.
Potential Factors Contributing to the Prediction
One possible factor contributing to the potential drop in GBP value is the ongoing USD corrective rebound. The USD has been on a decline since the start of the COVID-19 pandemic, but it has recently seen a rebound as the US economy continues to recover. This rebound could put downward pressure on other currencies, including GBP.
Another factor that could contribute to the potential drop in GBP value is the uncertainty surrounding the UK economy. While the country has made progress in its vaccination efforts and has been gradually reopening, there are still concerns about the long-term economic impact of Brexit and the potential for inflation.
Finally, the Bank of England’s (BoE) monetary policy could also play a role in the potential drop in GBP value. The BoE has maintained a dovish stance on interest rates and has indicated that it will continue to support the economy with its current monetary policies. However, if the bank were to change its stance or indicate that it may raise interest rates in the future, it could lead to a strengthening of GBP.
What Does This Mean for Traders?
For traders, this prediction means that there may be potential opportunities to profit from shorting GBP against USD. However, it is important to remember that trading always carries risks and should be done with caution.
Traders should also keep an eye on any developments that could potentially impact the value of GBP or USD, such as economic reports, monetary policy announcements, and geopolitical events. These factors can often lead to sudden shifts in currency values, and traders should be prepared to adjust their strategies accordingly.
Overall, while the potential drop in GBP value predicted by Scotiabank economists may cause concern for some traders and investors, it is important to remember that there are always opportunities in the markets. By staying informed and staying on top of economic and political developments, traders can make informed decisions and potentially profit from market movements.