Good afternoon,
After six years of quantitative easing (QE) the U.S. Federal Reserve (Fed) announced last night they would be bringing an end to their stimulus programme. With economic conditions improving the Fed are confident the U.S. economy no longer needs their support and the announcement had an immediate impact on the dollars value.
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As the news broke at 6pm (GMT) the GBP/USD cross dropped from $1.6128 to $1.6014 and over the next few hours continued to slide until the currency pair reached a low of $1.5968 as the graph below shows.
What next for the U.S?
Now that the Fed have ended their bond buying programme the focus will now turn to interest rates, although it is unlikely we will see any hike in the immediate future. With inflation in the U.S. still well below the target level and concerns hovering over the labour market I don't think we will see any knee jerk reactions from Janet Yellen.
The U.S are now in a similar position to the UK and if the both economies continue to improve there will be calls for interest rates to rise. Whoever moves first out of the Fed and Bank of England could lead to a surge for the relevant currency, so expect the volatility we have seen for the GBP/USD cross to continue over the next few months.
If you are looking to buy or sell dollars in the coming months and want to ensure you are making the most from your transfer, it is important to know what tools are available (unless of course you have a crystal ball!).
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