Thursday, 7 January 2016

GBP/USD exchange rate falls again.

Good afternoon,

The pound lost more ground against the dollar during Thursday's session with the currency pair falling to its lowest levels since June 2010. Despite the Federal Reserve's December meeting minutes showing that some policymakers were worried about the level of inflation in the U.S the pound continued to slide against the greenback during the early hours of today.

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After falling to $1.4602 yesterday GBP/USD reached a low of $1.4533 before recovering slightly in the afternoon as the graph below shows. Weaker than forecast unemployment claims in the U.S. help put a temporary stop to the pounds woes, pushing the cross briefly back over $1.46.

Why has GBP/USD continued to fall?

It is mainly down to dollar strength, with fresh concerns mounting over the state of China's economy and the Chinese central bank looking to devalue its currency to help the country's exports investors are looking for safer options.

In times of uncertainty currencies such as the U.S. dollar and Japanese yen are seen as a safe-haven. This is exactly what we have seen over the past twenty four hours, with investors seeking the safety of the dollar and in turn making it more expensive to buy.

Will GBP/USD improve?

At the moment it is difficult to see the pound gaining any major momentum against the dollar. We might see some short term gains but at present I cannot see GBP/USD climbing back towards $1.50 anytime soon.

If the level of global uncertainty continues and the Federal Reserve look to increase interest rates again in the near future it is possible we could see GBP/USD fall even further.

As I mentioned yesterday I wouldn't be surprised if cable fell below $1.45 by the end of the week, especially if the U.S. have a positive jobs reading tomorrow and if things don't improve in the UK we could see the currency pair test the $1.40 level in the coming weeks.


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