Will Sterling hold firm?

The US Dollars ability to capitalise on the Pound’s weakness has been relentless of late, particularly over the course of the last 3 weeks. Investors have been driving their money away from the risky Brexit bound Pound and driving it to the safer and far more lucrative US Dollar with interest rate hikes from the US Fed seemingly just around the corner. Since the 22nd of Feb, the US Dollar has driven the Pound down by more than 2.3% making a $200,000 transfer £3,500 more expensive. It means we are now back to similar trading levels to the precarious rates of October 2016.

The US economy was going from strength to strength and maintaining a steady grip on sterling that was struggling to tread water ever since the referendum vote back in June 2016. Fortunately for GBP holders, cable rates found resistance in the low 1.22s and the uncertainty surrounding Trump’s election prompted a rally from Sterling.

The question is, as we sit at the pivotal 1.22 mark, will the Pound be able to hold strong once again?

Janet Yellen: “US economy on course to hit targets”

On Friday, US Fed chair Janet Yellen once again wetted investor’s appetite for the dollar by suggesting the next interest rate hike is just around the corner. Speaking at the Executive’s club of Chicago, Yellen pointed to the US Economy comfortably hitting its expectations for inflation and unemployment as valid justification for the imminent interest rate hike.

Reuters revealed there is an 84% chance the Fed will raise interest rates before the end of March. Investors will be on the hunt for higher returns on investment and as such I wouldn’t be surprised to see GBP/USD rates break through 1.22, spelling long term weakness for the Pound. I would recommend USD buyers to act sooner rather than later before that mark is broken.

Economic data to consider

Short term USD sellers should keep a close eye on Friday’s non-farm payroll release on Friday afternoon. Experts are suggesting the release should come in slightly higher than the expected 190k with investment continuing to climb and so might well create a short-term spike to capitalise on.

Feel free to get in touch with one of our specialist currency brokers who will happily help you build a plan of action on 01494 725 353.

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