2021 GBP/USD Outlook: Riding on the Roller Coaster

WikiFX News (14 Feb.)- GBP/USD has traded in extreme volatility since the March low in 2020. It suffered from choppy downsides after hitting a high of 1.373 in mid-to-late January. The pair is expected to continue struggling with swings as both the pound and the dollar appear to languish in the recent period.

The UK economy in the past year suffered an unprecedented blow, with major sectors all hit to varying degrees. In 2021, the pound gained momentum from Brexit and rose sharply amid the hopes of economic recovery. The newly raised hopes, however, were dampened by the shocks of Covid-19, especially the UKs return to lockdown. As a result, the pound quickly slipped after recording an annual high.

“While GBP is likely to find support on any that a trade deal has been struck, it remains likely that any relief rally will be cut short,” said Jane Foley, head of FX strategy at Rabobank. “Any deal is set to leave many sectors, particularly in services, out in the cold.”

The dollar also will decline because of delays in the fiscal rescue plan, despite the brief rally that occurred after Biden took office. GBP/USD has been riding on the roller coaster since 2021. Such a trend will extend in the medium-to-long term at a price close to the current level, considering the US and European economies, as well as their currencies, will remain weak for longer.

Chart: Trends of GBP/USD