Cable started the week in volatile fashion with the currency pair suffering from the announcment by Moody's that the UK's AAA credit rating had been downgraded. The agency reduced the UK rating to AA1 following growing speculation over recent weeks and adding to the concerns over the future health of the British economy which may prompt other agencies to follow suit.
GBP/USD rates opened the week over 1% down from the previous Friday and continued to slide throughout the week, falling into the $1.49's for the first time since June 2010. As the slide continues and with no signs of recovery sterling currently holds the title of the weakest currency of 2013.
Over in the States US political leaders are still locked in last-ditch talks at the White House to try and thrash out a deal over the prospect of huge budget cuts. Cuts worth $85bn, originally passed in January are due to become law by the end
of Friday. Some analysts in the US are suggesting that countries GDP would suffer if the cuts are not delayed, if this were to happen we could see exchange rates start to creep back up again.
The issue for clients looking to buy dollars
is that even if the cuts start to weaken the US economy there is every change that the dollar could gain strength. It is commonly
said that the economic health of the states is a barometer for the rest of the world. Therefore a weak US economy could see
investors pull their funds from riskier investments such as the pound and euro and put them back into the the safe-haven US Dollar.
Next week should be a very interesting one
for the pound/dollar cross as we will be able to see what impact the first round of cuts will gave on the markets. Sterling
will also remain in the spot light as the Bank of England meet for their monthly meeting. Recent data releases have fuelled reports that more Quantitative easing is on the cards and if implemented there is every chance the pound could lose further ground.
If you are a business or private client and have a need to buy or sell dollars over the coming months waiting to see where the markets will be is a very risky tactic. If you complete the contact form I can talk you through the different type of currency contract that can help you make the most of your currency transfer.
