The British Pound struggles to rebound, weighed down by multiple factors affecting the market outlook

The British Pound against the US Dollar has recently rebounded, but this rally faces severe challenges. According to the latest market analysis, the downward trend of the Pound may become the main tone moving forward, with several investment banks turning cautious on the Pound’s outlook.

Fading Stimulus Effect of the Budget Bill

After the UK budget was announced, the Pound briefly rose to 1.3269, hitting a recent monthly high. However, Jefferies investment bank believes this rally will be short-lived. Analysts point out that ongoing fiscal fragility remains a market concern, making more aggressive trading strategies more attractive. The market is still digesting the risks of fiscal out-of-control and structural imbalances. As of press time, the Pound has fallen to 1.3227 against the US Dollar, a decline of 0.08%.

Lack of Fundamental Support, Pound’s Downward Pressure Hard to Relieve

A recent report from Morgan Stanley indicates that the correlation between the Pound and the stock market has dropped to zero, with domestic driving factors clearly insufficient. Strategist David Adams and others have revoked their previous bullish recommendations, believing that the rebound brought by the budget bill might be the last upward opportunity, after which the bullish stance on GBP/USD will be difficult to sustain.

The report emphasizes that there are few reasons to hold the Pound at present. Although the budget bill has settled, market expectations for subsequent trends remain weak. The risk of the Pound falling is due to the lack of proactive policies and economic drivers.

Central Bank Rate Cuts: Double-Edged Sword or Turning Point?

In the long term, the Bank of England’s rate-cut cycle is expected to ease some pressure. As borrowing costs decrease, household consumption and corporate investment may be stimulated, thereby driving economic growth. However, investment bank analysts believe that if economic growth prospects do not truly improve, market sentiment will be difficult to shift.

Morgan Stanley points out that after the rate-cut cycle nears its end, economic growth will become the key driver for the Pound. Current market pricing still focuses on arbitrage trading logic; if growth prospects do not improve sufficiently, the Pound’s decline may be hard to reverse.

Exchange Rate Attractiveness Diminished

The investment appeal of the Pound against the US Dollar has significantly declined. Unlike the previous high-yield arbitrage logic, the current market lacks substantial factors supporting the Pound’s rise. Analysts believe that under the dual impact of fiscal uncertainty and weak economic outlook, the Pound will find it difficult to reverse its downward trend in the short term.

Recent trends show that the downward momentum of the Pound has gradually been established. Investors should closely monitor the Bank of England’s policy moves and economic data, as these factors will determine the future direction of the Pound.