GBP/USD exchange rates heads back towards $1.30

The pound rose almost two cents against the dollar today, with the GBP/USD cross rising from $1.2797 to $1.2969 and leaves the currency pair at its highest level since the 25th May.

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Sterling rose across the board as a result of comments made by Bank of England (BoE) Governor Mark Carney this afternoon.

His comments related to a potential interest rate hike in the UK and an apparent change in stance from the BoE Chief. Only last week Mr Carney poured cold water over the recent Bank of England rate vote (when three members of the policy committee voted in favour of an immediate rise) by saying that now is not the time to start hiking rates.

However, this afternoon Carney said some removal of monetary stimulus could soon become necessary, essentially saying the central bank could soon raise interest rates and the news gave the pound a much needed boost.

GBP/USD graph

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Mixed day for the pound

Today has been a choppy one for the GBP/USD cross, with exchange rates bouncing between $1.2758 and $1.2707.

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Initially the pound started well after the dollar weakened during the Asian trading session, with the currency pair rising around half a cent. The dollar lost ground after expectations of additional rate rises from the Federal Reserve this year have begun to fade.

The pound was unable to hold onto the gains and within a few hours had lost the ground it made this morning. However, Sterling was able to bounce back again after news broke that UK Prime Minister Theresa May had secured a deal with the DUP.

GBP/USD graph

After losing her majority in the UK election earlier this month, todays deal has allowed May to boost her minority government and continue with her Brexit plans.

The deal is also good news for investors as it removes some of the political uncertainty ahead of the Brexit negotiations.

Markets will now be able to focus more clearly on the official divorce talks with the European Union, and if negotiations run smoothly we could see the pound start to rise against the dollar over the coming weeks.

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The pound recovers some ground

Today has seen the pound claw back some ground against the U.S. dollar, with the GBP/USD cross rising over a cent to briefly break the $1.27 barrier.

 

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Sterling lost ground yesterday following Bank of England Governor Mark Carney's speech at Mansion House, when he indicated that "now was not the time to increase interest rates". However the pound rebounded this afternoon after Bank of England Chief Economist Andy Haldane hinted that he could look to vote in favour of a rate hike during the second half of 2017.

Mr Haldane was not one of the three Monetary Policy Committee (MPC) members to vote for an immediate hike last week, but his comments today have given investors extra hope of a rate hike before the end of the year.

GBP/USD graph

Despite Mr Haldane's comments today, in my opinion I think it is unlikely we will see the Bank of England take any action in the near future, and with Brexit negotiations now in full swing, the pound will probably remain under pressure.

With that in mind, the rise we have seen for the pound today could well be temporary and we could easily see GBP/USD drop below $1.25 in the coming weeks.

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The pound continues to lose ground against the dollar

After falling around a cent yesterday, the GBP/USD cross has continued to lose ground this morning following Bank of England Governor Mark Carney's speech at Mansion House.

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With the official Brexit negotiations finally getting underway yesterday, the pound started to fall across the board, as investor appetite for the UK currency weakened due to the uncertainty of Britain's exit from the European Union.

Sterling then dipped suddenly this morning, with the GBP/USD cross losing around three quarters of a cent as Mr Carney stated that the time is not right for an interest rate hike, despite three members of the Monetary Policy Committee (MPC) voting in favour of an increase last week.

GBP/USD graph

What did Carney say?

During his speech Mr Carney said that due to the mixed signals on consumer spending and business investment, and given the subdued inflationary pressures, in particular wage growth, now is not yet the time to begin increasing interest rates.

Carney also highlighted the impact of Brexit on the UK economy is still unclear, and was another reason why he would not consider a rate hike at the moment.

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GBP/USD exchange rate update.

A lot has changed since my post yesterday.......

After writing about how the pound had fallen against the dollar following the Federal Reserve's decision to raise interest rates. The pound received a unexpected boost yesterday afternoon as the Bank of England rate votes showed that three of the eight Monetary Policy Committee members had voted in favour of an immediate rate hike.

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The surprise announcement caused the pound to rise across the board, with the GBP/USD cross rising over a cent to hit $1.2792, allowing sterling to claw back most of the ground it lost on Wednesday evening.

GBP/USD graph

 

So far today the pound has been able to hold onto the recent gains, and even manage to briefly break the $1.28 barrier this afternoon. However, the rise we have witnessed over the past twenty-four hours could well be short-lived.


Come Monday morning, focus is sure to turn back to the UK and Brexit with official negotiations due to begin. Investors and market players will be listening closely for any clues to how the divorce talks are proceeding.

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Why has the pound fallen against the U.S. dollar?

The pound finds itself around a cent lower against the dollar this morning, with the currency pair slipping from $1.2810 to $1.2705.

Sterling has lost ground after the U.S. dollar strengthened overnight following the Federal Reserves (Fed) decision to increase its benchmark interest rate by 0.25 per cent yesterday evening.

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As many expected, Fed Chair Janet Yellen announced the U.S. central bank had increased interest rates for the second time this year, with policymakers voting in favour of hiking rates to a range of 1% to 1.25%.

The decision leaves U.S. interest rates at its highest level since 2008, and gives the dollar a much needed boost after it lost ground yesterday afternoon following weaker than forecast inflation and retail sales figures.

GBP/USD graph

Along with the interest rate rise the Fed also announced they would start to look at reducing its $4.2 trillion bond portfolio. The Federal Reserve currently hold $4.2 trillion of mortgage-back securities and Treasury bonds, which were purchased following the financial crisis.

What else could impact the GBP/USD exchange rate today?

This afternoon we will hear from the Bank of England (BoE) and Governor Mark Carney. The BoE are set to announce their latest interest rate decision, monetary policy summary and how the Monetary Policy Committee (MPC) voted.

It is highly unlikely the BoE will take any action today, as they have repeatedly stated they will not look at raising interest rates until after the UK has left the EU.

However, with figures confirming UK inflation had risen to 2.9% earlier in the week, some of the other MPC members could be swayed into voting in favour of a hike.

Over the last few months one member of the MPC (Kristen Forbes) has been voting for an immediate increase, if an extra one or two members now feel the same we could see the pound strengthen in the next couple of hours.

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GBP/USD exchange rate breaks $1.28

This afternoon has seen the pound continue to claw back the ground it lost against the dollar following last week's shock UK election result, with the GBP/USD cross rising back above $1.28.

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However, the pound did not start the day well. Figures released this morning showed that wage growth in the UK had dipped in the three months to April, meaning the amount workers are taking home is falling as inflation is rising.

The news caused the pound to lose around half a cent against the dollar, with the currency pair falling from $1.2790 to $1.2740, as you can see from the graph below.

GBP/USD graph

So why did GBP/USD rise?

The rise was actually down to dollar weakness rather than sterling strength. The dollar fell across the board after the U.S posted weaker than forecast inflation and retail sales numbers.

Figures showed that retail sales in May suffered their biggest fall in sixteen months, while consumer prices also unexpectedly dropped.

It meant the pound was able to take full advantage and allowed GBP/USD to hit an intraday high of $1.2815, the highest we have seen since the 8th June.

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Pound rising against the dollar

Today has seen the pound regain some lost ground against the dollar, with the currency pair so far rising over a cent.

During the course of the trading session the GBP/USD cross has risen from $1.2643 to $1.2746, after the latest UK inflation reading helped lift sterling across the board.

 

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Following last weeks shock UK election result the pound fell against all of its major counterparts, with GBP/USD dropping three cents to a two month low of $1.2632 on Friday afternoon.

However, today's inflation figure gave the pound a much need boost, with figures confirming inflation had risen to 2.9% against a forecast of 2.7%, increasing speculation the Bank of England will need to raise interest rates sooner rather than later.

 

GBP/USD graph

Attention will now move away from the UK's political uncertainty and Brexit negotiations for the time being, with markets and investors now focusing on tomorrow's Federal Reserve monetary policy announcement.

Over the past few weeks markets have been pricing in the Fed hiking rates this month, although recently there have been indications Janet Yellen & Co could hold fire because of the uncertainty surrounding President Trump.

If the Fed do not raise their benchmark interest rate tomorrow, it is likely we will see the dollar weaken, and the GBP/USD cross could push back above $1.28.

 

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A popular tool for clients with an upcoming transfer is a ‘Forward Contract’. This allows you to secure the current exchange rate for up to 2 years, by lodging 10% of the total you need to convert.

This protects you against the rate moving against you, and also allows you to budget effectively.

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Hung parliament causes the pound to fall.

Well that wasn't the outcome many had predicted.......

After a disastrous night for Theresa May in the polls, this morning we find the UK facing a hung parliament, and it has certainly taken the wind out of the pounds sails. 

 

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After the Tories fell short of a majority the pound has suffered across the board, with the GBP/USD cross falling over three cents since yesterday evening. Following the release of the exit polls at 10pm last night Sterling dropped two cents from $1.2950 to $1.2750, and as the results started to come through the pound continued to lose ground.

As the London session opened this morning the GBP/USD cross had fallen further, and a one point had slipped to $1.2639. However, we have seen a slightly recover over the past couple of hours with the cross climbing back above $1.27.

 

GBP/USD graph

What next for the pound?

A hung parliament is not ideal, especially with Brexit negotiations due to start on the 19th. It has created even more uncertainty and uncertainty is the one thing investors and the markets hate.

Unless a coalition is formed quickly it is possible the pound will fall even lower in the coming days. Theresa May will now be working franticly to try and put a deal together with another party, and in the last few minutes we are already starting to hear from the media that May has already struck a deal with the DUP.

The DUP currently hold ten seats and if a deal has been agreed, it will give Theresa May enough to carry on as Prime Minister.

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GBP/USD exchange rate hits fresh high

Earlier today we saw the GBP/USD cross climb to $1.2976, leaving the currency pair at its highest level since the 25th May. The pound rose across the board after a recent opinion poll showed Theresa May and the Conservatives were well on course for victory in today's UK election.

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However, with markets and investors still erring on the side of caution, Sterling has been unable to hold onto the gains and this afternoon had slipped back down to $1.2910, as you can see from the graph below.

GBP/USD graph

Could the pound climb higher?

If Theresa May wins the election with a large majority then it should give the pound a boost. A few weeks ago GBP/USD rose above $1.30 and if the Conservatives are successful, we could easily see the cross break that barrier again once the election result has been confirmed.

At the moment it is difficult to say how much the pound will rise, as a lot will depend on how much a Tory victory has already been priced into the market.

There is certainly room for improvement for the GBP/USD cross, but with the political uncertainty in the U.S. still hampering the dollar, the pound has only dropped around a cent against the greenback in the last three weeks compared to six cents against the euro.

If we do see the GBP/USD cross break $1.30 tomorrow, it will be interesting to see how long it lasts. Once the election is out of the way, focus will quickly turn back to the Brexit negotiations and we could see the pound come back under pressure once again.

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Sterling rises against the dollar but is unable to hold onto the gains.

The pound hit a two week high against the dollar this morning, with the currency pair hitting an intraday high of $1.2948.

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However, the GBP/USD cross has been unable to hold onto the gains and this afternoon found itself half a cent down, and is now trading at $1.2890.

 

GBP/USD graph

Why has the pound fallen?

With a lack of key data releases it looks as though sterling is still being weighed down by the uncertainty of Thursday's UK election.

At the moment the opinion polls are not providing us with a clear front-runner and it seems to be worrying investors and traders. We only need to look at the polls from yesterday to see how it is impacting the markets, with one poll suggesting and eleven percentage point lead for the Tories, while another released yesterday evening only gave the Conservatives a one point advantage.

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Pound recovers against the dollar

Following the tragic events in London over the weekend the pound lost ground across the board, with the GBP/USD cross slipping back to $1.2850.

 

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However, the pound has managed to bounce back over the course of today after the latest opinion poll showed the Conservative party holding an eleven percentage point lead over the Labour opposition.

As you can see from the graph below the pound has risen nearly a cent today after markets reacted positively to the latest opinion poll released by ICM. However, with only a few days until voting takes place we could easily see the pound come back under pressure.

GBP/USD graph

If we see other polls suggesting a tighter result as we get closer to Thursday, then the pound could continue to fall.

The result of the election could have very different effects on the value of Sterling. If the Conservatives win with the majority, it is likely we will see the GBP/USD cross push back towards $1.30.

However, if we wake up on Friday to a Labour victory or a hung parliament then the pound could go into free-fall, potentially leaving the GBP/USD cross at the levels we witnessed back in March ($1.2150).

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GBP/USD update and what could impact exchange rates today?

Yesterday afternoon saw the pound rise against the U.S. dollar with the currency pair climbing back above $1.29 to hit an intraday high of $1.2911. It meant the GBP/USD cross rose nearly a cent through Thursday's trading session, as investors looked past the results of the recent opinion polls and continued to side with Theresa May in the build up to next week's UK election.

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However, this morning has seen the pound edge lower against the dollar, with the cross giving up around half a cent, and is currently trading at $1.2860.

GBP/USD graph

Why has the pound fallen?

Despite rising yesterday, it would seem sterling is still being weighed down by political uncertainty. This morning saw the UK publish its latest Construction PMI figures, and even though the reading smashed forecasts (coming in at 56.00 against a prediction of 52.7) it has done very little to help strengthen the pound.

Today's Construction figures follow on from a positive Manufacturing PMI reading yesterday, and proves once again that economic data is having no impact on the UK currency at the moment.

What else could impact GBP/USD today?

This afternoon will see the U.S release their latest job report (also known as Non-Farm Payroll), and as regular readers will know the data can cause huge swings in the value of the dollar.

The report is almost impossible to predict as figures often deviate by tens of thousands from the predicted reading.

If the report is weaker than expected then we could see GBP/USD push back above $1.29 later today.

Are you thinking of buying or selling dollars?

If you have an upcoming requirement to buy or sell dollars in the coming days and are concerned about how the UK election or this afternoon's job report could impact your transfer, contact us today for a free currency consultation.

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