Author, Andrew Gibson
A GBP to USD forecast is an expectation of an exchange rate in the future – whether that be days, weeks, months, or years away from now. Exchange rate forecasts help banks, brokers, businesses and individuals, make informed decisions.
Will the Pound get stronger against the US Dollar in 2021?
Overall, the Pound has been trending up against the US Dollar in 2021 so far.
The Pound has undergone a recovery as the twin risks of Brexit and Covid have subsided.
To give you some context, in the past 5 years, the Pound is sitting close to its highest level.
The high in GBP to USD has been $1.433 in April 2018, and the low has been $1.149 in March 2020 (source: Bank of England database).
Of course, it takes two to tango in currency markets.
In terms of the US Dollar, it hasn’t performed badly in 2021, just not as strong as the Pound.
The US and the UK have successfully vaccinated the majority of their adult populations against Covid, enabling the reopening of both economies. This has translated into currency strength on both sides of the Atlantic.
As such, we don’t see much divergence in growth expectations or central bank policy to trigger an advantage either way.
One canary in the coal mine could be global stock markets.
Share prices have had tremendous gains following the post-pandemic government stimulus. They’ve gone up like crazy.
A major sell-off, or even a sharp pullback, will happen at some point. If you see the early signs, it’s worth knowing that this will favour the US Dollar as it is seen as a safe haven when things get ugly.
For now, though, momentum remains with the Pound, but the trend has become less pronounced. Since March 2021, the GBP/USD rate has been largely range trading.
GBP to USD Forecast Poll (1 week, 1 month, 1 quarter)
There are countless methods and models used by financial analysts to forecast currency markets.
No model is 100% effective.
Businesses and individuals will often analyse a cross-section of available forecasts to make a more informed decision.
A simple way for you to get a quick overview is to take a look at the GBP/USD Forecast Poll on FX Street.
It lists the views of 38 analysts over 1 week, 1 month and 1 quarter timeframes.
OK, that’s a lot of opinions to take on board!
To make things easy, there is a graph at the top of the page that summarises the consensus view.
You can then see if there is a Bullish or Bearish bias over each time period.
A bullish bias means analysts think the Pound will rise against the US Dollar. Conversely, a bearish bias indicates the Pound is expected to fall.
Things can change quickly, but at the time of writing, the Pound in general terms retains a bullish bias.
That doesn’t come as a surprise because the Pound has had a positive trend for some time.
As the saying goes, “the trend is your friend, until the bend in the end”.
It’s the bend in the end we’ve got to worry about.
Don’t be concerned by the fact that there is plenty of disagreement among analysts. That’s normal and healthy for that matter.
In fact, I always get nervous if the consensus ever gets too one-sided.
A sure thing in the financial world is often a warning sign that a trend is nearing its peak.
To throw in another old adage from the trading pit, “what is obvious is obviously wrong”.
The point of all this is never certainty. You will only ever have certainty in hindsight.
Forecasting exchange rates is about making an informed judgement based on probability and using that to your advantage.
GBP to USD Forecast Weekly (my short-term approach)
If you’re timeframe is really tight – such as a tiny 1 week window – then I believe that warrants a different approach to someone looking at longer time horizons.
If 1 week is your horizon, there’s no point looking at a 10-year chart of GBP/USD.
That won’t offer you any insights over the coming week.
It’s also not enough time for any long-term fundamental factors to play out.
I would look at recent GBP/USD price history only – looking for trends and trading ranges, and upcoming news. That’s it.
Start by looking at a chart over different short-term timeframes – 1 day, 1 week, 1 month – and look for any near-term trading ranges or trendlines.
Most traders I know look at different timeframes to get a more complete picture of the trend and to try and validate any observations they make.
Another additional check I would suggest is to look at what’s coming up on the DailyFX Economic Calendar.
I prefer the DailyFX calendar because it shows the impact that each number is expected to have on the exchange rate (low, medium or high).
There is a lot of ‘noise’ in markets – there’s plenty of news that has little impact and just fills your head with useless information.
Over a 1-week period, you want to focus on the high impact numbers. These are the ‘market movers’.
There may not be any high impact news this week, or it could be a busy week, and there’s 2-3 things to watch out for.
It might affect your timing.
As an example, you might decide to trade today because there is a big US jobs number due out later in the week, and you don’t want to take the risk of an adverse move.
If you don’t feel confident going it alone, you may wish to speak with a money transfer specialist that can help.
Part of our service is to monitor currency markets on behalf of our clients.
We can discuss current rates, target levels and even let you know if the rate moves in your favour.
If you would like to check out our latest rates, or find out more about our service, click below.
GBP to USD Forecast (next 6 months and beyond)
As an individual, you may not have any impact over what the Pound or US Dollar will do in the future.
But as Warren Buffett would say, you can decide when you “swing the bat”.
The choice of when to exchange your money can be a valuable or costly decision – depending on your timing.
In finance, this time advantage is called ‘optionality’.
When you look at the difference between the highs and lows in Pound to Dollar exchange rate over the past year alone, you will appreciate how much currencies can fluctuate over time.
A 1%-2% swing might be considered a substantial move in GBP/USD rate over the course of a week, however over 6 months, it’s not unusual to see swings of 5%-10%.
In effect, the opportunities (and risks) are greater.
Say, for example, you were looking to transfer £50,000 to a US bank account.
A 5% move in the Pound to Dollar rate translates to a £2,500 difference.
That’s serious money.
So, no doubt timing matters.
But likewise, a common problem I see is when people are always hoping for a better rate – regardless of whether the rate is rising or falling.
I hear reasoning like this all the time:
The Pound is getting stronger; I’m going to wait for it to go even higher.
The Pound is getting weaker, I’m going to wait for it to bounce back.
In other words, the ‘perfect time’ never comes along.
The hidden cost of always waiting for a better rate is often not financial – it’s that your life plans are put on hold as your money sits idle.
My practical advice for anyone researching long-term GBP USD forecasts is to use historical rates as a guide to your decision making but keep your expectations realistic.
Personally, I always look at where the exchange rate sits in comparison to the last 1 year and 5 years, and not normally beyond.
The reason is over longer periods (10+ years), there will have been developments and significant events that have had a permanent effect on the GBP/USD rate.
There’s no point longing for the good old days because time brings change.
To illustrate this point – back in the early 1970s, one Pound was worth over $2.70.
Those that have waited for this rate to return and either dead or dying of boredom.
On any timeframe you look at, you will notice that exchange rates peak and trough on a frequent basis.
In terms of the GBP to USD exchange rate, a peak is good for buyers of Dollars, and a trough is good for sellers of Dollars.
The aim is simply to take advantage of favourable fluctuations.
It’s a case of trying to achieve the best rate possible and then moving on with your life.
Need guidance on GBP/USD exchange rates?
Trying to navigate the world of foreign exchange can be stressful, particularly if it’s something you are not overly familiar with.
No one can be an expert on everything.
But the fact is getting a good or bad Pound to Dollar exchange rate can make a big financial difference to you, so it’s always worth trying to achieve a better rate.
At Key Currency, the way we operate is fundamentally different from a lot of other money transfer companies.
Most companies you will come across these days are really just online systems or apps.
There is no human interaction – which benefits the company but not the customer.
In contrast, an important part of our service is to monitor exchange rates on behalf of our clients and help them take advantage of favourable moves.
At Key Currency, we give you a one-to-one service, allowing us to understand your requirements and exchange your money to your best advantage.
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