The U.K. economy is being one of the slowest to recover from the global slump that started in the second semester last year, and as economies recover globally faster than in the British Isles, the pound may decline further versus the euro and the dollar.
After posting the fourth consecutive weekly decline versus the greenback, the outlook for the British currency remains rather unattractive, as forecasts suggest a higher than previously expected budget deficit for the following years in the U.K., forcing the currency down versus most of the 6 majors traded in foreign-exchange markets. The Federal Reserve is likely to increase borrowing costs in the world’s wealthiest nation as several reports coming from different sectors of the economy indicate a rebound that would make possible earlier than expected increases in interest rates, affecting positively the dollar in currency markets, which is likely to climb further versus the pound.
Even if the Moody’s Investors Service affirmed last week that it will not downgrade the U.K.’s top credit rating, investors are not confident that the British economy will provide better data which could stop a losing streak set for the sterling for the upcoming weeks.
GBP/USD closed the week at 1.6251 from an opening rate of 1.6484 in the beginning of the week.