GBP to USD exchange rate forecast: Sterling could drop to 1.3500

The GBP to USD price rallied as the market reflected on the optimistic outlook of the UK economy ahead of the reopening. The GBP/USD pair rose to 1.3840, which was 1.15% above the lowest level in March.

Sterling steady on UK progress

The British pound has been relatively resilient than other developed country currencies. This year, it has risen by more than 2% while the dollar index has risen by more than 3.50%. The euro has lost close to 4% during this period.

There are several reasons for this price action. First, the UK reached a breakthrough Brexit deal with the European Union in December. This averted a catastrophic crash from the European Union, which is the country’s biggest trading partner.

Second, the Bank of England (BOE) has sounded relatively hawkish in the past interest rate decisions. In several statements, Governor Andrew Bailey has voiced concerns of negative rates. He believes that they will have a negative impact on the country’s banks, which are leading employers.

Finally, the UK has made a lot of progress on vaccinations. According to the government, more than 29 million people have received a shot. This is a substantial figure considering that the country has a population of more than 60 million. Therefore, according to Boris Johnson, the country will reopen soon. 

Further, the GBP to USD has reacted positively to recent economic numbers. The UK unemployment rate has dropped to 5.0% because of the furlough program. In contrast, the rate in Europe is about 8.1% while the US has an unemployment rate of 6.2%. On Friday, data showed that the UK retail sales rose by 2.1% in February.

Looking ahead in April, the GBP/USD price will depend on statements by the Bank of England (BOE) and the Federal Reserve. Forex investors will also focus on the recovery of the two countries and the important bond yields.

GBP to USD exchange rate forecast

The daily chart shows that the GBP/USD pair has lost momentum in the past few days. After soaring to a multi-year high of 1.4240 in February, it has dropped by almost 3%. It has also moved below the lower side of the ascending channel pattern. The price is also between the lower and middle lines of the Bollinger Bands. 

Therefore, there is a likelihood that it will keep falling as sellers target the next key support at 1.3500. However, a move back to the ascending channel will invalidate this trend.