Today has seen the pound lose more ground against the
U.S. dollar, with the GBP/USD cross falling to its lowest levels since October
and leaves the currency pair within touching distance of a fresh 31-year low.
For the best GBP/USD exchange rate click here.
In the last four weeks the pound has lost over five per
cent against its U.S. counterpart, with exchange rates dropping from above
$1.27 in December to $1.2046 this afternoon (mid-market).
Talk of the UK’s exit from the European Union has been
weighing heavily on the pound in recent weeks, but after Prime Minister Theresa
May’s comments on Sunday, have we now seen the worst for the pound?
Following May’s comments at the weekend, it would seem
markets have now priced in the UK giving up its access to the single market in
order to focus on the immigration controls that many of the ‘leave’ voters
crave. So, if markets have priced in the worst case scenario, we may have just
witnessed the GBP/USD cross hitting rock bottom.
GBP/USD three month graph
The Trump effect.
We also have to remember what is happening over in the U.S.
The dollar’s value surged in 2016, with President-elect Donald Trump promising
to cut taxes and increase spending in order to boost the U.S. economy. The
dollar was also helped after the Federal Reserve raised interest rates last
month and hinted at a possible three additional hikes in 2017.
However, markets are now starting to become extremely
cautious about what Trumps presidency will actually mean for U.S. economy. If
he fails to deliver on his promises, it could prevent the Fed Chair Janet
Yellen from hiking rates in the foreseeable future therefore, we could start to
see the dollar lose some of the recent gains it has made.
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