Is The GBP/USD Heading Towards 1.40?

There was a report out over the weekend that has gone relatively unnoticed by the large financial news agencies. However it shouldn’t be overlooked because if true it could result in the British pound heading even lower in the coming years, with experts predicting that the GBP/USD could fall to 1.40.

The report by the Centre for Economics and Business Research states that interest rates in the UK are likely to remain at their current level, ie 0.5%, until at least 2011, and growth is likely to be slow.

As a result the GBP/USD could fall to 1.40 and the euro, which has already rallied strongly against the pound in recent months, could strengthen even further and may even go above 1, ie the EUR/GBP could exceed 1.0000 (current price = 0.9330).

I personally wouldn’t disagree with either of these predictions, particularly the GBP/USD forecast. This pair is now comfortably below the EMA(200) on the daily chart and looks like it is about to turn sharply downwards. In fact the price has today broken through the recent low of 1.5770 and it looks as if we are now at the beginning of a new downward leg.

So I think the GBP/USD could well be headed towards the 1.40 level in the long term, both on a fundamental and technical basis.

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