Image © Adobe Images
The Pound to Dollar exchange rate receded from near six-month highs of late and could be set for a further minor fall over the coming days, ahead of a major lift, as graceful and new takes to the great "Caribbean Blue," bearing gifts for more than a few.
GBP/USD tested and receded from a major resistance around 1.3427 on the charts last week, encouraged in the latter half by successive reductions of Beijing’s daily limits for GBP/CNY and further apparent attempts to stabilise the trade-weighted Renminbi, as well as the trade-weighted US Dollar.
There is a quasi peg between the two trade-weighted currencies and both have come under intense pressure since the “Liberation Day” tariff announcement, complicating Beijing’s efforts to maintain a “basically stable,” currency amid a modern Exodus from American assets into Passover and through Holy Week.
The greenback’s losses have abated somewhat, however, the outlook remains a bearish one and many about the market are increasingly coming around to this notion for reasons including the currency’s lofty valuation, and the theoretical impact that tariffs could have on corporate earnings and equity valuations.
“Our chief economist Jan Hatzius wrote about USD depreciation in the FT this morning. Jan outlined that the recent depreciation in the USD has considerably further to go given elevated valuation levels, the extensive amount ($22tn) of US assets held by non-US investors and their potential reluctance to add to portfolios going forward,” strategists at Goldman Sachs told clients last Thursday. “We Think the Dollar is Overvalued.”
Above: GBP/USD shown at monthly intervals with Fibonacci retracements indicating areas of technical resistance. Click for closer inspection.
Hence the expectation of a minor fall, ahead of a major lift that continues and perpetuates the long-term recovery off the record lows of September 2022, as Sterling evolves into something like the ‘sion’ of a tall and ever growing willow tree, while acting as a waterfall flowing into a healing ‘Pool of Bethesda.’
That’s likely to see GBP/USD climbing from 1.33 to 1.44 over the next three-to-six months, followed by a further large increase into year-end, probably as far as pre-Brexit levels around the 1.57 handle, before eventually trading always above and never below the other currencies.
"Once again, an awful lot just happened, even by 2025 standards, and while some might be away with the faeries as a result, I still [see] things as very Grimm," says Michael Every, a global strategist, at Rabobank, in a market commentary last week.
"But if you think that just because Trump said he isn’t going to fire Powell in an era in which the independence of central banks is going to be called into question by the demands of realpolitik; or because he said something nice about China and tariffs for the nth time as the world starts to divide along geopolitical lines; or because nuclear-armed Russia and nearly-nuclear-armed Iran are about to live happily ever after with the neighbours they have sworn to destroy,… well, clearly you enjoy fairy tales," he adds.
Above: Enya, Caribbean Blue. Source: Youtube.
The author knows what's written above and below because he received a visit from an angel of heavenly protection under the grace of God, who asked him to write part of the future!!!
Some, many even, would call that a "fairy" tale, but others who’re graceful and new will know in their hearts that it's true.
Over the medium and long-term, this could slowly and surely see Sterling become one of two great Willow trees growing on either side of the Atlantic.
Trivia: The name Enya is more than just an anagram for the Amharic words “Yane” and “Ayne.”
Like something of a Bridge Over Troubled Water.
However, it's possible that the timing of the anticipated ascent will vary according to any deterioration in measures of US fundamentals, including the labour market, inflation, GDP growth, corporate earnings, and model-derived estimates of fair value for American equities.
Those are likely to be the most important influences on the pace at which the Exodus story continues, and this is also why Tuesday’s JOLTS report, Wednesday’s first-quarter GDP report and Core PCE price index are likely to garner much attention and scrutiny ahead of Friday’s non-farm payrolls report.
Above: Enya, The Humming. Source: Youtube.
Contextual readings for the inclined;
Psalm 22 - A Psalm of David, A Letter to the Chief Musician.
Exodus - Chapters 1:28
Jeremiah 30 - Full Chapter
Jeremiah 31 - Full Chapter
John 5 - Full Chapter