Sterling’s value has fallen recently against the USD, with the interbank rate falling by over 2 cents over the last 7 days. This drop could be attributed to the still unknown path that Brexit will take. With so much commentary about what could happen next, betting odds offer one way of thinking about the probability of different Brexit options. At the time of writing the bookmakers Paddy Power imply a 60% chance of a 3rd Meaningful Vote next week, even odds of an election in 2019, and a 20% change that there will be a deal in place within the next 7 days.
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The latest information suggests that the PM will be pushing for a 3rd vote on her deal next week but with her failing to convince her fellow MPs the two previous occasions the pound has been falling in value with the interbank rate dropping by 2 cents over the last week.
On Wednesday evening we had the latest update from the Federal Reserve Bank (FED) on their current policies. After the two-day meeting the bank confirmed to keep current interest rates unchanged which was widely expected. The surprise came with future forecasts from the bank. They changed their forecast on future interest rate changes during 2019 from 1 expected further increase to none. The bank suggested that growth in the US has slowed and pointed towards more contractions in housing spending and business investments. US Inflation for January and Febraury fell to 1.5% which was the lowest in 2 years, this supports the Fed’s current dovish stance on future rate hikes.
The chairman of the Fed Jerome Powell maintained his stance on policy, continuing to be patient. He hold went on to say "It may be some time before the outlook for jobs and inflation calls clearly for a change in policy." This resulted in the dollar falling in value against most currencies excluding GBP as the strain of Brexit continues to weigh on the pound.
Last week US President Trump submitted a new budget to Congress for approval. This included new funding for a boarder wall and the military, however included a cut in spending in healthcare and education.
This is expected to be another debate with Congress and could well risk another Government shutdown. Something to be aware of if you are looking at buying USD in the near future.
Today we have PMI data for the manufacturing sector being released along with existing home sales which are expected to be positive. Next week is also busy with Consumer Confidence being released on Tuesday, trade data on Wednesday, GDP figures on Thursday, and overall PMI data on Friday. If you are in the market looking for USD next week, with all the above taking place along with the Brexit deadline, it could be prudent to get in touch with your account manager to discuss your requirements and the potential outcomes of upcoming events.
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