Tuesday, 7 February 2017

Why is the GBP/USD exchange rate falling?

Good morning,

The dollar has started to gain some momentum since my post yesterday afternoon and as a result the GBP/USD cross has continued to fall.

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After dropping to a low of $1.2428 on Monday afternoon, pound recovered slightly last night with the GBP/USD exchange rate edging back towards $1.2475.

However, the chances of a recovery for the currency pair seem to have vanished, as investors have shifted their focus back towards the safety of the dollar, forcing sterling/dollar back into the mid $1.23's, the lowest we have seen since 20th January.


GBP/USD graph


Why has the dollar strengthened?

With concerns mounting amid the political uncertainty around Europe the dollar has been clawing back some of the ground it has lost since the start of 2017.

Investors are worried that Marine Le Pen's stock is rising ahead of France's presidential election, and that the upcoming elections across Germany and Holland could also have an impact on the future of the Eurozone.

Markets are also becoming nervous about the prospect of the European Central Bank reducing their monthly stimulus programme, and with Greece starting to hit the headlines again because of their on-going bailout package, we could start to see the euro come under even more pressure.

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