Over the last 2 weeks, GBPUSD exchange rates have changed dramatically with movements of nearly 5 cents. This equates to a difference in return of $9,000 depending on the timing of a £200,000 transfer.
Yesterday alone the GBPUSD exchange rate climbed by over 1% following commentary that a Brexit deal may well be agreed in the very near future.
|Currency Pair||% Change in 1 month||Difference on £200,000|
As we continue the monthly cycle of economic data there are a number of key releases pending this week. Today we will see the consumer spending figure released which is expected to show another improvement, along with Retail figures tomorrow and Industrial Production on Friday.
These data releases will be keenly watched as the US continues to suggest further interest rate hikes in December, which is only a matter of weeks away.
Generally, when interest rates go up the value of the currency rises as demand increases which I expect to continue. Saying that however, US interest rates climbing is not generally a good thing for global markets.
As a majority of countries hold debts based in USD, when interest rates climb, so do the required repayments. As a result emerging markets, which is where most global growth comes from, could suffer. The other consideration is that every 1% rise in interest rates means an additional $200 billion in annual interest payments by the US Government, about a quarter of the US’ annual military budget.
This is something to consider when reviewing your personal financial forecasts in the coming months. I personally expect GBPUSD rates to be driven in the medium term by US interest rates and the prospect of a Brexit deal being made.
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