Despite breaking through $1.57 last week Sterling has struggled over the past few days with GBP/USD exchange rates falling to a low of $1.5483 this afternoon. In todays post I will take a closer look into what has impacted the rates and what we can expect over the next few days. For more information on live market prices click here.
Since Mark Carney took over as Governor of the Bank of England (BoE) the UK economy has been on a road to recovery. This was confirmed on Friday as the UK GDP figures for Q2 were revised up from 0.6% to 0.7% which was mainly down to all four of the sectors that make up the bulk of the economy improving in recent months. Coupled with the BoE issuing Forward Guidance there a now clear boundaries in place regarding interest rates which has made Sterling a much more attractive option for investors.
Although last week was fairly quite in terms of data releases the pound did manage to break through $1.57 for the first time since June 16th, the gains, however even with the improvement in the GDP figures the pound quickly lost ground and dropped nearly a cent against the dollar as the U.S Federal Reserve (FED) released the minutes from their June meeting. There has been a lot of speculation recently as to when Ben Bernanke and the other FED officials will begin to cut back on the $85 billion they are currently pumping into the U.S economy to stimulate growth, and as a result the minutes were being closely watched for any clues as to when the tapering may begin.
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Although the minutes did not give any clear start time, a few of the FED officials were keen for action to be taken sooner rather than later, the news strengthened the dollar almost immediately and gave an insight to what we can expect when Mr Bernanke actually gives the go ahead. Once the FED start to wind up the stimulus package the dollar will continue to strengthen which in turn will drive down the GBP/USD cross.
So what happened today?
Following the Bank Holiday in the UK there were no data releases of any note, yet the pound continued to slide across the board. Sterling dollar fell from $1.5591 to $1.5483 and is likely to be down to the markets pricing in what they think will happen when Mr Carney gives his speech tomorrow (Wednesday). Although the UK economy is improving there are still people calling for the Bank of England to add to their existing Quantitative Easing programme and if there is any hint of this tomorrow there is the potential for the pound to fall even further.
If you need to buy or sell dollars in the coming weeks or months it is important to know what options are available to help you make the most from your currency transfer. With a range of currency contracts at my disposal I can help you target a rate that might not be currently achievable or protect you against any adverse market movements. There is rarely a quite time in the FX markets and getting the timing right on your transaction can potentially save you thousands. If you would like to know more use the link below and complete the contact form for a free, no-obligation consultation.
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