Pound/dollar rates fall as recession looms

Last week was a very busy week for data releases and big movements were seen for the GBP/USD cross. This week’s report will look at what has affected the rates recently and what you need to consider over the coming weeks when wanting to make the most out of your funds.

The UK economy was the main focus last week and all eyes were on the Bank of England (BoE) minutes Wednesday morning and Q4 Gross Domestic Product (GDP) figures out on Friday morning. The BoE minutes showed interest rates staying at 0.5% and an 8-1 vote against more monetary stimulus being required to help boost economic growth. Better than expected unemployment figures also helped slow the movement in the rates as Sterling gave up three quarters of a cent to the USD.

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Insecurity seems to be the driving force regarding the GBP/USD cross at the moment, if investors are unsure due to increased volatility and uncertainty, safe haven currencies tend to benefit and strengthen, and this is exactly what the USD is doing at the moment.  We have seen a 3.4% drop in the GBP/USD rate in just 3 weeks and it does look as if the rates could continue this trend over the coming months. Fridays GDP figures came in as expected with a figure of -0.3 showing that the UK economy is now one half of the way towards a triple dip recession.

Further movements in the rates will continue and we could see problems stateside if the fiscal cliff debate continues past the March deadline. With UK credit rating agencies chuntering about removing the current triple-A rating for the UK Banks; if this does happen, we could see further movements and a reduction in the GBP/USD rate as it will cost more for consumers and investors to borrow funds and will hinder future debt reduction targets as economic growth will slow. 

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With the movements we have seen so far for 2013, a typical purchase of $250,000.00 would now cost you nearly £6000 more. If you are looking to make the most of your funds whether it is now or in two years time now is the time to take action. Click here for a free no obligation consultation discuss your options and different types of contract at your disposal.