Firstly apologies for the lack of posts over the past few weeks, a technical issue has prevented any updates.
So lets take a moment and look at what has happened to GBP/USD exchange rates over the past couple of weeks. In my last post I mentioned that the GBP/USD had broken through $1.59 following dovish comments from the Federal Reserve.
Since then the currency pair has been slowly falling away as events around the globe have seen the dollar start to strengthen, which has left the current mid-market price at $1.5555.
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With Greece still in negotiations with their credits over a fresh €86bn bailout package, investors and market players have been keen to take advantage of the dollars safe-haven status.
In the last week there have also been further developments about when the U.S. Federal Reserve will look to increase their benchmark rate. It now seems the central bank will look at a rate hike this year, though there are still question marks over when it will actually happen.
The general consensus is that we will see the FED take action in September, however, if the U.S. economy tails off between now and September we could see the decision pushed back towards December.
What does this mean for GBP/USD?
If the FED do indeed raise interest rates in September we could easily see GBP/USD exchange rates continue to slide. Investors will look for a higher return on their investments and I wouldn't be surprised if we saw the rate dip back towards the $1.50 mark.
But what if the rate hike is pushed back?
If the FED fail to act in September then it will become a two horse race between the FED and Bank of England. Comments from BoE Governor Mark Carney last week indicated that a rate hike in the UK was on the horizon and that we could see an increase towards the end of the year.
I think it is highly unlikely the Bank of England will act before the FED but if they do we could see GBP/USD test the $1.60 barrier for the first time this year.
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