After a brief recovery GBP/USD fell to it lowest levels for nearly three weeks today. This morning saw cable trading close to $1.6450, which was a marked improvement from the levels we witnessed on Monday. The gains were shorted lived though as during trading today exchange rates fell to a low of $1.6323, a level we have not seen since Christmas day.
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Over the past few weeks we have seen this kind of movement a few times, rates climbing towards $1.6450 then quickly falling away. The uncertainty which has surrounded the U.S. economy in recent months has contributed to the dollars value dropping and coupled with the fact the UK is performing well have meant GBP/USD exchange rates have remained over $1.60 since mid-November.
With both the U.S and UK economies starting to stabilise, what we are seeing now in exchange rate movement is the result of daily economic data releases. If the UK produces positive figures in the morning rates are climbing but are quickly counteracted by the U.S. producing positive numbers of their own in afternoon.
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It is likely this will continue until the Federal Reserve wind up their stimulus package or something major comes out of the woodwork in the UK. It is impossible to predict which way exchange rates will move and no one has a crystal ball but most market players and investors believe we will start to see the dollar gain some momentum during 2014.
I think it is likely we will see GBP/USD rates start to fall during the year but exactly when and by how much is difficult to predict. If the FED continue to reduce their stimulus package it could only be a matter of time until we see rates back below $1.60.
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