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Is the Pound Stronger Than the Dollar in the Long-Term?

Is the Pound Stronger Than the Dollar in the Long-Term?

Updated: March 13, 2024

Peter Emmanuel Chijioke

Contributor

Reviewed by

Dr. BJ Johnson

Editor

Fact-checked by

Mirjan Hipolito

Cryptocurrency and stock expert

Expert verified

Is the Pound going to get stronger against the Dollar?

When attempting to examine the GBP/USD price for 2024, several unanswered questions and impending doubts make it challenging to make a solid forecast regarding the direction of the pound sterling relative to the US dollar (USD) in the coming year.

The dollar may strengthen if the market realizes that the Federal Reserve will not cut interest rates in 2024.

Analysts predict that GBP/USD will fall in the first half of 2024 and then rise again in the second half, with a target of 1.30 and above. The pound is expected to depreciate synchronously with the dollar.

The main influence on the GBP/USD exchange rate has its own fundamental factors. The value of the British pound depends on the BOE monetary policy, inflation, labor market dynamics and the general state of the economy. Generally speaking, higher interest rates strengthen currencies and vice versa. The Bank of England's involvement in international economic developments is the main driver of the GDP's strength.

Interest rates are set by central banks, namely the Federal Reserve (Fed) for the USD and the Bank of England (BoE) for the GBP, and these decisions have a significant impact on the GBP-USD exchange rate. There are several anticipated effects on the exchange rate when central banks lower interest rates.

While the US dollar and British pound have been trading within a narrow range since the start of 2024, this does not mean that the pound will stay strong for the entire year. IThe GBP could lose value relative to the USD if the BoE lowers interest rates while the Fed raises or maintains them. This is due to the possibility that holders of assets in the USD would wish to take advantage of higher interest rates. Some are pessimistic and think it will drop below 1.20 in the next six to twelve months, even though most pound-to-dollar projections indicate that it will reach 1.30 by the end of 2024.

Recall: the fundamental influence on the GBP exchange rate forecast is also influenced by the dynamics of the Euro, although after Brexit the correlation between EUR and GBP has become much weaker. The GBP reacts speculatively to all Eurozone economic news and ECB actions.

What other factors will influence the GBP/USD in 2024?

Next year, both the US and the UK are gearing up for general elections, which could significantly impact the GBP/USD pair's volatility. Against a backdrop of rising inflation and economic uncertainty, all eyes are poised to closely monitor political developments on both sides of the Atlantic.

In the United States, the Democratic and Republican primaries began in January, with expectations of a contentious battle between incumbent President Joe Biden and former President Donald Trump on November 5. The 2024 US presidential election could also introduce uncertainty and potentially weaken the dollar.

Hence, political instability or unexpected election outcomes can lead investors to seek safer havens and potentially favor the pound. Other factors that could influence the GBP/USD in 2024 include:

Economic Performance: A strong economy, characterized by high GDP growth, low unemployment, and stable inflation, can lead to increased confidence in the currency and a higher value.
Trade Balance: A country with a trade surplus (exports exceed imports) may see its currency appreciate as foreign buyers need to convert their currency into the local currency to purchase goods.
Market sentiment and speculation can also impact currency value. Positive outlooks on the dollar in global markets can lead to an increase in its value.

GBP/USD Long-term chart

With lower highs (LH) and lower lows (LL), the GBP/USD pair has been trending lower overall. But since reaching its previous lower low in 2017, it has been retesting and consolidating the resistance and support zones it established at 1.41000 and 1.20000, respectively. If the buying momentum continues, we might see a break of the 1.41000 resistance zone in the GBP/USD pair. Because of the brief upward trend, the pair might also make another lower high at the 1.50000 zone.

When the pound-dollar pair broke the 1.20000 support in the final quarter of 2022, it appeared to be making a fake breakout, but it was unable to retest it and instead continued to decline. Trader's

Note

You can follow the TU experts' regular analysis of the pounds-to-dollar price charts to stay current on the most recent value.

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What is the GBP USD prediction for 2024?

According to the different analyses by different experts and financial agencies, the expected value of the pound-dollar exchange rate for the remaining months of 2024 is predicted to be around 1.2639. The estimated rate in two years is 1.2626. These numbers diverge significantly from the predictions made by numerous leading currency rate analysts regarding the GBP-USD exchange rate for 2024.

According to Goldman Sachs' latest forecast, the Pound to Dollar exchange rate will reach 1.28 in three months starting in January 2024, and it will reach 1.2750 by the end of 2024.
According to ING analysts, as the dollar declines, the pound-to-dollar exchange rate (GBP/USD) will strengthen to 1.31 over the next 12 months.
But according to Danske Bank, the GBP/USD pair will drop to 1.04 before the year 2024 rounds up.
Analysts at Bank of America predict that by the end of 2024, the GBP/USD exchange rate will have strengthened to 1.37.
Credit Agricole predicts that the GBP/USD pair will drop to 1.25 by the end of the year, but they see potential for short-term pound support.

GBP USD prediction in 2025 and beyond

The forecast for the British Pound (GBP) over the next five years might be influenced by the UK economy and the Bank of England's challenging issue of stagflation in the coming months or even years, even though the country may avoid an official recession. Following its peak in late 2024, the GBPUSD is expected to resume its downward trend and trade as low as 1.10 over the following five years.

Note

You can follow the TU experts' regular analysis of the pounds-to-dollar price to stay current on the most recent value.

GBP USD forecast for 1 day, 1 week, 1 month

GBP/USD forecast by TU is prepared automatically on the basis of technical analysis of moving averages and indicators for each timeframe (interval) separately. Select the timeframe you need to find out GBP/USD price prediction for today.

Note!

Signals may differ on different timeframes. If you want to hold the GBP/USD for longer than 1 week/1 month, it is best to use the signals on daily and weekly timeframes. Timeframes from 5 minutes to 1 hour are best suitable for short-term transactions.

Conclusion

As most analysts predict, direct and indirect support for the pound is expected if the Federal Reserve and the ECB continue their aggressive rate-cutting strategy. According to a prominent American money manager, the Federal Reserve will not cut interest rates in 2024, which could lead to a sharp increase in the value of the dollar. Notwithstanding the Bank's insistence that rates must stay low for a while, markets expect the Bank of England to begin rate cuts later and behave less aggressively than the Federal Reserve or the European Central Bank.

Team that worked on the article

Peter Emmanuel Chijioke

Contributor

Peter Emmanuel Chijioke is a professional personal finance, Forex, crypto, blockchain, NFT, and Web3 writer and a contributor to the Traders Union website. As a computer science graduate with a robust background in programming, machine learning, and blockchain technology, he possesses a comprehensive understanding of software, technologies, cryptocurrency, and Forex trading.

Having skills in blockchain technology and over 7 years of experience in crafting technical articles on trading, software, and personal finance, he brings a unique blend of theoretical knowledge and practical expertise to the table. His skill set encompasses a diverse range of personal finance technologies and industries, making him a valuable asset to any team or project focused on innovative solutions, personal finance, and investing technologies.

Dr. BJ Johnson

Developmental English Editor

Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.

The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.

Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.