Investing.com -- The pound on Monday looked set to wrap up the third quarter at the end of week with hefty losses against the dollar, and likely faces uphill battle ahead as sterling bulls are throwing in the towel to join the bears in forecasting doom and gloom for the currency following the Bank of England's rate pause last week.
GBP/USD fell 0.2% to $1.22, keeping it on track to post a 4% decline in Q3, but there could likely be further selling pressure in the months ahead.
Goldman Sachs waves officially waves goodbye to bullish bet on sterling
"We are revising down our GBP/USD forecast path to 1.18, 1.20, 1.25 in 3, 6, 12 months (vs 1.24, 1.29, 1.33 previously ... and officially shifting back to Sterling bears," Goldman Sachs said in a recent note after recently revising down its expectations for the level of peak U.K. rates, or terminal rate, after the Bank of England held interest rates steady at 5.25% last week.
Goldman Sachs had previously expected the pound to continue racking up gains against its rivals on bets that the BoE terminal rate would need to reach 6% "due to the strength in the domestic data." But that proved an overestimation with Goldman Sachs now suggesting that rates have peaked, as a faster than expected slowing inflation and weaker growth has been enough to persuade the BoE to lean less hawkish.
Economic upside surprise could turn savior for battered pound
Better-than-expected economic data, however, could help the pound snap out of its funk as it would force the BoE to reconsider its progress on slowing inflation, Goldman Sachs adds, pushing the BoE back towards a more 'forceful' response.
But recent data including weaker manufacturing data released Friday, suggests this is unlikely and has vindicated the BoE's decision to keep rates on hold, ING said.
"Our economics team is now calling for another hold and the end of the tightening cycle in the UK," ING added. "Markets agree with this view and only price in a 25% chance of a November hike and a 50% probability of a hike by December."