The Federal Reserve have once again kept interest rates on hold at 2.5%. The accompanying statement made by the Federal Open Market Committee was rather dovish and this caused the dollar to experience some weakness against the pound.
|Currency Pair||% Change (Month)||Difference on £200,000|
The Fed removed the term ‘patience’ from their statement and Fed Chair Jerome Powell appears to be leaning towards a potential rate cut in the US. Out of the seventeen members of the Fed there is a total of seven members who expect a total of 50 basis points during 2019.
Powell also appears to be concerned about the ongoing US-China trade war. He pointed towards the weakness in business investment and with global growth showing signs of a slowdown this could put pressure on the Fed to look at cutting interest rates.
The Bank of England’s comments were rather dovish yesterday and with the central bank having downgraded the UK’s growth forecast this has helped the dollar to fightback against the pound since yesterday’s lunchtime.
Indeed, the USD/GBP interbank rate is still close to its best level seen since January. It is possible that there could be a small lift for the pound once we get more clarity as to who the next Prime Minister could be but overall the dollar is likely to remain very strong for the time being against the pound.
Global tensions are still rising and with the US-China trade wars seeing no signs of ending in the near future the US dollar is still being used as the safe haven currency.
Later today the US will announce Services and Manufacturing data for May. Both sets of data have remained fairly steady in recent months so another positive reading above 50 could see further dollar strength vs both the euro and the pound. Therefore, if you’re planning a currency transfer to buy US dollars it may be worth speaking with you account manager to remain up to date on market movements.
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