The Pound is under serious pressure across the board and this is no more apparent than its current value against the USD.
GBP/USD rates have fallen below 1.20 and although the Pound has found some support around this level, the USD hit a fresh 31 year high over the weekend.
This has provided clients holding the greenback with a fantastic opportunity to sell their positions but the key question is how much further will Sterling fall? Personally, I expect the Pound to continue to find support around the 1.20 threshold but I am not confident that we will see any sustainable increase as we head towards the triggering of Article 50 in March. The Supreme Court ruling could influence investors but even this is unlikely to drive the Pound’s value up, whilst there is such minimal investor confidence in the UK economy at present.
The USD has performed extremely well against the Pound for some time now, in line with an impressive run of economic data and renewed business confidence ahead of Trump’s Presidential appointment.
Whilst we have little insight into his policies as yet, he seems to be making the right noises and his business background seems to be brining renewed confidence to the USD.
How long this will last is difficult to say, due to his persistence of rocking the boat with his controversial statements but whilst the Pound remains “stuck in the mud” ahead of the UK’s Brexit, expect the USD to continue to perform well over the coming months, even if the prospective trade deal with the UK mentioned by Trump over the weekend comes to fruition.
With further interest rate hikes expected in the US this year I expect GBP/USD rates to remain under 1.25 for the foreseeable future.
US data for the early part of this week is fairly sparse so the markets will be looking towards Wednesday’s inflation data and head of the FED Janet Yellen’s speech.
Any indications that the FED will be looking to hike rates again soon will likely help solidify the USD’s position around 1.20 against Sterling.
Thursday we have the release of employment data, followed by another spec by Yellen on Friday, so expect increased volatility on GBP/USD rates towards the latter part of the trading week.
If you have a US Dollar requirement, it may be worth getting in touch with your assigned broker before Theresa Mays Brexit announcement tomorrow. Call our trading floor on 01494 725 353 or email email@example.com if youd like to learn more.
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