The markets have struggled to get behind the Pound against the Dollar since the Bank of England governor Mark Carney down played the chances of an interest rate hike next month.
Sterling's woes were further compounded this week with investors flocking to the Greenback as demand for US bonds sky rocketed whilst forecasts for US inflation levels added more confidence that the Federal Reserve will be pursuing an even more aggressive path to raising interest rates throughout this year. The below table shows the market movements for GBP/USD exchange rate in the last 10 days:
|Currency Pair||% Change||Difference on £200,000|
Cable for the most part this week has remained anchored in the mid 1.39 levels with the Dollar index hitting near seven-week highs.
Considering the European Central Bank is also looking likely to shy away from any monetary policy action following its decision later today, I am now of the strong opinion the US Dollar will use this recent momentum to continue making in-roads against its major currency counterparts and break key resistance levels whilst the going is still good.
I feel that as news of Brexit negotiations begins to filter back in to the news headlines, a move below 1.38 looks far more likely to happen before a bounce back from the Pound to hit 1.40 once again. I think this is particularly likkely if the EUR/USD exchange rate drops below the psychological 1.20 mark.
For those looking to buy Dollars, this afternoon may well set the tone for the rest of the week. Now that inflation seems to be in check the Federal Reserve will shift it’s focus to growth levels and employment data. As a result, there will be extra impetus put on the Continuing Jobless claims release due at 12:30pm. This release has fallen fairly consistently since the final stages of last year and it looks set for a similar a story today, which could lead to further Dollar strength. Particularly if the ECB are as cautious as expected.
A surprise on the other hand may well undermine the current confidence in the Dollar and could provide a brief spike for Sterling holders to capitalize on.
Overall, particularly with the Key GDP figures released tomorrow afternoon I can only see Dollar strength short term. As result if you are looking to buy Dollars with Pounds, it may pay to get a game plan together with your account manager this morning, incase this afternoon’s fireworks take matters out of your hands.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353.
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