Good afternoon,
The GBP/USD cross has remained relatively flat throughout today's trading session with the currency pair spending most of its time between $1.5570 and $1.5600.
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The week started reasonably well for the pound as comments from Federal Reserve Vice Chairman Stanley Fischer dampened expectations we could see the U.S central bank raise interest rates in September.
Following Friday's positive jobs report the dollar's value surged as investment flows increased into the U.S in preparation for a September hike. The gains made by the dollar on the back of the jobs numbers were short lived though, as Vice Chairman Fischer spoke on Bloomberg TV yesterday.
During an interview on Monday morning Vice Chairman Fischer indicated the current global deflationary trend was a concern but was quick to highlight that it is one of many factors the central bank are currently looking at.
As a result of the comments GBP/USD rose nearly a cent and a half over the course of yesterday, with the mid-market price climbing from $1.5463 to $1.5593.
Who will act first?
With so much uncertainty still surrounding a rate hike in the U.S. the next few weeks are going to be key for the short to medium term future of the GBP/USD cross.
If we the Fed fail to act in September we could see the dollar lose some ground, especially as the Bank of England are hot on their heels. Also, with Greece making headway with the creditors over a potential bailout package the dollar could come under pressure as investors turn their attention to riskier assets.
As a specialist currency broker I am often asked where the rate will be in the future. Although it is impossible to predict which way the FX markets will move there is a simple answer to that question at the moment.
If the Fed raise interest rates in September we will probably see the GBP/USD rate fall and if the rate decision is pushed back then GBP/USD will probably rise.
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