Monday, 12 December 2016

Pound edging higher against the dollar.

The pound has edged up against the dollar this morning, with the GBP/USD cross rising from $1.2568 to its current level of $1.2612, putting a temporary stop to the decline we witnessed last week.

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Friday saw the pound end last week around 1.5 per cent down against the dollar, with the currency pair falling from $1.2761 to $1.2572, sterling's worst performance for nearly a month.

GBP/USD graph

Busy week for the central banks.

This week could be another volatile one for the pound and dollar, with key announcements coming the Federal Reserve and the Bank of England.

On Wednesday the Federal Reserve will deliver its latest interest rate decision and although the markets have already priced in a rate hike from the Fed, we could easily see some movement in the value of dollar if Chair Janet Yellen decides to take some action.

With the Bank of England likely to loosen monetary policy next year to help boost the UK economy, and the European Central Bank extending their stimulus programme last week, I wouldn't be surprised to see the dollar rise as investors opt for the safety of the greenback and a higher return on their investments.

Investors will also be keeping a close eye on the Bank of England meeting on Thursday. Although the BoE are unlikely to make any changes to its benchmark interest or its quantitative easing programme, we could see some movement for sterling crosses as markets digest Governor Carney's comments about the future of the UK economy.


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