Will the pound sterling be the worst-performing currency this quarter?

By Smart Currency November 2nd, 2016


Currency markets saw increased volatility levels last quarter, due to events such as the UK’s build-up to Brexit. The pound sterling (GBP) weakened considerably following the UK’s majority vote to leave the UK, and was the worst-performing currency in October 2016, when measured against 150 peers. Will sterling continue to flounder this quarter? And, with the US presidential election coming up, what will happen to the US dollar (USD) if Trump wins? There are no real answers to questions like these at present, but we have created forecasts for three major currency pairs in order to give you an idea of what could happen. These Quarterly Forecasts are for sterling-euro (GBP/EUR) and euro-US dollar (EUR/USD), in addition to sterling-US dollar (GBP/USD).

GBP/USD currency forecasts

2016 Major Bank Forecasts – GBP/USD July Forecasts
Institute 1 Month 3 Months 6 Months 12 Months
Barclays 1.2400 1.2800 1.3200
HSBC 1.2000 1.1500 1.1200
JP Morgan 1.3100 1.3200 1.3300 1.3300
Morgan Stanley 1.2500 1.2600 1.2700 1.3300
Nordea 1.3100 1.3130 1.4470
RBS 1.3100 1.3100 1.3500
Wells Fargo 1.2800 1.3200 1.3000 1.2600
Median 1.2847 1.2600 1.2700 1.2650
Minimum 1.2500 1.2000 1.1000 1.0500
Maximum 1.3400 1.3700 1.3900 1.4700
Smart Estimate* 1.2894 1.2727 1.2633 1.2706

*Reuters Smart Estimate by SmartMine, a division of Thomson Reuters

Forecast accurate from 6th October 2016. Data taken from Reuters poll.


Looking forward to this quarter, here are some key economic factors that are likely to affect the UK economy this quarter, which could impact GBP/USD. The biggest one is Brexit.

Although Prime Minister Theresa May has announced that she will trigger Article 50 by the end of March 2017, the UK’s future is still unknown. Brexit-related uncertainty will continue to drive sterling markets this quarter.

Interest rates are another factor that, if changed, could have a significant impact on the UK economy. Markets remain open to the possibility of a rate cut this quarter, driven by the growing global economic pressure that the UK faces.

Across the pond, growing global economic risk is making investors uncertain as to whether the US Federal Reserve will raise interest rates this quarter. The presidential election on 8th November also throws a spanner in the works, and a surprise result could mean increased US dollar volatility.

For the full report, download our Currency Quarterly Forecasts

This article was written by Harry Narenthira who is a Corporate Trader at Smart Currency Business.