After the huge swings we saw in exchange rates last week for sterling dollar, today has been relatively quite with rates staying within a 40 pip range. At the time of writing this post the mid-market price was sitting at $1.5100, slightly down from the highs we saw towards the end of last week as markets reacted to the issues in Cyprus over their bailout.
Over the weekend it came to light that if Cyprus were to obtain the 10 billion euros bailout that was agreed with the IMF (International Monetary Fund) and EU (European Union) all bank clients will have to pay a one of tax on their deposits. This led to huge protests and a big surge in cash withdrawals as customers attempted to get as much money out of the banking system as possible.
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This latest problem for the euro-zone has impacted the GBP/USD cross as safe-haven flows into the dollar would have increased on the back of the news. The greenback is seen as a safe-haven currency so problems in the euro-zone will prompt investors to move their money from riskier assets in the EU until the problems subside. These safe-haven flows means it the dollar has strengthened and as result is more expensive to purchase.
It is possible we will see rates continue to fall over the course of the week, in the UK George Osbourne will announce his latest budget and the Bank of England will release the minutes from their meeting at the start of the month. Both are likely to cause some volatility in the currency markets if last month was anything to go by, the BoE minutes caused a huge drop in rates in a matter of seconds as it became clear that policymakers views are starting to change towards more Quantitative Easing. I will keep you posted to how these events impact exchange rates over the next few days.
If you need to buy or sell dollars in the next few days but want to try and get a bit more out of the market then Stop and Limit orders can help. They allow you to target a rate that might not be currently available but at the same time protect you against any adverse market movements. If you would like to know more then use the link below for a free, no obligation consultation.
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