The next three months could be crucial for the pound. With Brexit talks ongoing, COVID-19 cases rising and local lockdowns being announced on a regular basis, sterling could be in for a bumpy ride as events unfold over the next few months. So, where could the pound be by December?
It’s safe to say that no one, not even the banks, can predict the outcome of these events. Therefore, it’s very difficult to forecast how the pound might move.
Nevertheless, we’ve collated predictions from major banks and highlighted key factors which may influence the pound, euro and dollar in our latest quarterly forecast. It certainly makes for an interesting read, not least because the forecasts show a huge disparity.
Pound versus Euro
According to some analysts, GBP/EUR could fall to around €1.02 in the next three months. Not everyone is quite so pessimistic. Predictions stretch as high as €1.18 but settling at an average of €1.10.
The pound has been primarily driven by Brexit negotiations recently. Talks are still ongoing and hopes of a ‘thin’ trade deal remain. Any further news on this over the next few months has the potential to impact the pound, especially if talks run right down to the wire.
The euro’s boost after the introduction of the European Recovery Fund has waned slightly over the past few months. With cases rising across Europe, we could see the euro suffer, especially if economic data continues to look increasingly bleak. However, any news of increased funding to help member states deal with the pandemic could strengthen the euro.
Pound versus dollar
As global cases continue to rise, the dollar has, once again, started to benefit from its safe-haven status. However, it is not immune to factors such as the upcoming US election and news regarding the US stimulus bill.
The long-awaited stimulus bill, which is designed to help the US economy deal with the coronavirus pandemic, is yet to be agreed upon. Democrats and Republicans had different views on how much money should be offered and where it should be spent. However, President Trump has said this week that he supports a large aid package, so there are hopes that the details of the bill can be finalised soon.
Uncertainty surrounding the outcome of the US election could also have an impact on the greenback. Joe Biden leads in the opinion polls, but it’s thought that several key swing states could determine the outcome. More voters than ever are voting via post this year, which could mean that the result could take days or even weeks to come through.
Euro versus dollar
Predictions for EUR/USD show a huge disparity, ranging between 1.14 and 1.24 by December.
This pair could be largely dependent on demand for the dollar as a safe haven currency. If the coronavirus situation continues to worsen, we could see the dollar strengthen and the euro weaken. However, the US election, Brexit and the European economy could each have a part to play in determining the fate of this pair.