Following this mornings positive UK inflation reading the pound was able to break through $1.57 barrier for the first time since June. The gains made by the U.S. dollar during yesterdays session were quickly swept away as the GBP/USD cross rose from $1.5564 to $1.5714 after UK inflation rose to 0.1% in July.
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The pound rose across the board as the stronger than forecast inflation data broke, it had been predicted the inflation reading would remain at 0%, having turned negative back in April.
So with this mornings positive CPI reading, plus core inflation rising to a five month high the pound was able to shake off the dollars recent gains, unfortunately it didn't last for long.
The dollar managed to claw back some of the ground as data showed U.S. housing starts rose to a near eight-year high last month. The housing starts report, along with the positive retail, industrial and job numbers we have seen over the past few weeks suggests the U.S. economy could sustain a rate hike from the Federal Reserve next month.
As I have mentioned before, a rate hike next month could have a huge impact on the GBP/USD cross. I think it is unlikely we will see the Bank of England act this year so it certainly leaves the door open for the dollar.
If the Fed decided raise rates next month we could easily see GBP/USD fall back towards $1.50, not the best news if you are looking to purchase dollars in the next few months.
If you have a requirement to buy dollars in the coming weeks it is vital to know what options are available to help you make the most from your transfer. A number of my clients are taking advantage of a Forward Contract which enables you to secure a rate of exchange for up to two years into the future.
A Forward contract is a great budgeting tool and a great way of reducing your exposure to the ever changing FX market. For more information on Forward Contracts or to find out what rate of exchange I can offer, use the link below to complete the contact form or call me directly on 0044 (0) 1442 892 065.
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