Forecasters would always like to be ahead of the curve. However, when big macro events occur they are often left struggling to keep up with the market. That can often result in an overreaction in consensus expectations. Take the dramatic plunge in the euro in late 2014 and into 2015 as an example. Having fallen by 20% in short order, the consensus forecast settled at 1.05 although many were saying at the time that the euro would trade through parity. It didn’t.
The collapse in sterling and revaluation of forecasts recently appears very similar. However, while we aren’t as pessimistic as the consensus, with many calling for GBPUSD to test all-time lows, the recent rally may have gone too far, particularly with the BoE promising stimulus measures come August 4th.
We expect a dip to 1.28 by the end of September.
Copyright © 2016 CIBC, eFXnews™Original Article
