FX.co ★ GBP/USD: The pound is predicted to rise to 1.5000

The British currency is trying to overcome the negative consequences of Brexit and a series of lockdowns that have engulfed the national economy. Analysts expect the GBP to continue to grow on the back of the economic recovery.

Such factors as the long-term weakening of the dollar and the confident recovery of the British economy amid the active vaccination against COVID-19 contribute to the improvement of forecasts for the British pound. Recall that the fall in the USD was triggered by statements by Jerome Powell, the head of the Federal Reserve, about maintaining the current monetary policy, as well as large-scale stimulus measures initiated by US President Joe Biden. According to the plans of the American leader, the priority areas for stimulating the economy in the amount of $4 trillion will be infrastructure (the first stage) and social support programs (the second stage). The statements of the head of the White House provoked a rise in risk sentiment and further sales of the USD.

Against this background, the UK economy was in a more advantageous situation. Unlike the Federal Reserve and the ECB, which have committed to buying indefinite bonds to support their economies, the Bank of England has set specific targets on this issue. According to the regulator's plans, the target amount for the purchase of government bonds should be in the range of 875 billion pounds by the end of 2021.

Analysts believe that the current situation contributes to the growth of the British currency in the medium and long term. Additional incentives for the GBP will be the weakening of monetary stimulus and a reduction in the pace of bond purchases by the Bank of England. Representatives of the regulator believe that a rapid economic recovery does not require a simultaneous tightening of monetary policy (DCT). The Bank of England's ongoing efforts are aimed at achieving the 2% inflation target and making progress in employment.

This week, sterling surprised the market by reaching a nine-day high. This was facilitated by the dovish rhetoric of the Federal Reserve, which pushed the USD to nine-week lows. Federal Reserve chairman Jerome Powell considers it too early to abandon the emergency stimulus of the US economy. The statements of the head of the Federal Reserve were in the hands of the pound. In view of this, the GBP/USD pair quickly gained momentum, trying to gain a foothold at current levels. But on Friday morning, April 30, the GBP/USD pair lost some of its gained positions, trading in the range of 1.3938–1.3939.

According to currency strategists at ANZ Research, the medium-term outlook for sterling is positive, and the GBP/USD pair may remain bullish until the end of this year. The recovery of the upward trend in tandem contributes to the growth of the British economy. As a result, by the end of 2021, the GBP/USD pair will rise to 1.4600, and in 2022 – to 1.5000, according to ANZ Research.

Optimism about the recovery of the UK economy contributes not only to the rise of the pound, but also to the improvement of economic growth forecasts in the country. Experts expect the Bank of England to make updated decisions on monetary policy at the meeting scheduled for May 6, 2021. Positive conclusions about the monetary policy will lead to an increase in sterling, Bank of America experts believe. Furthermore, the bank expects the regulator to improve its forecasts for 2021 on economic growth and short-term inflation. Recall that in February of this year, the Bank of England expected the national economy to rise by 5%, despite the impressive decline in production (by 10%) in 2020, the largest in more than 300 years.

At the moment, experts are positive, believing that economic growth in the UK will exceed 7% in 2021. Analysts believe that the implementation of such a scenario will return production to the pre-crisis level that existed before the pandemic.