With today being US Independence Day news concerning the US will be slow until Wednesday. However, Mark Carney’s speech on Tuesday has the potential to weaken the Pound, as the chance of UK interest cut increases, investors may flock to the US Dollar.

US Dollar benefits from safe haven status in uncertain times

The US Dollar is historically known as a safe haven currency, which investors flock to in times of uncertainty. It’s no surprise then, that since the uncertainty surrounding the UK’s vote to leave the EU, we have seen a huge influx of funds out of GBP and into USD, seeing the Greenback soar to its best levels against Sterling in 31 years and a fantastic opportunity for anyone looking to sell US Dollars to repatriate them to Pound Sterling.

Today is Independence Day so the US market will be shut, whilst tomorrow is also a quiet day for data releases, so it will be down to Sterling to determine rate movement for the beginning of the week. Mark Carney’s speech on Tuesday is likely to put the Pound under further pressure in my opinion, as the chance of an interest cut increases.

FOMC Minutes on Wednesday

On Wednesday evening at 7pm, the minutes from the FOMC’s latest interest rate decision in June are set to be released, which could give a further insight in to the reasons that the Federal Reserve kept interest rates on hold. Some were expecting that Janet Yellen would be announcing an interest rate hike in their latest meeting, but Yellen was fairly dovish, using key words such as ‘gradual’ and ‘cautious’, whilst mentioning the risks that a Brexit could pose. Now that the Brexit vote is official, it is looking highly unlikely that we will be seeing an interest rate hike across the pond anytime soon and we may have to wait until 2017, even though many were predicting at least two interest rate hikes this year.

As a result, I believe that we may see some respite for the Pound based on the fact that the Fed may be hesitant to act whilst the UK’s future is so uncertain, coupled with the fact that their Presidential election campaign won’t be over until November. With the Pound at such low levels against the Dollar, I believe that USD buyers should look to act on any spikes in their favour that we see in the short-term.

For news on upcoming data releases and the fallout from the Brexit vote you can call our trading floor on 01494 725 353 or email me at rjh@currencies.co.uk.

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