This update examines factors that could affect US Dollar exchange rates this week.

Lowest levels to buy Pounds with US Dollars in 5 weeks

The Pound hit a 5 week low against the Dollar yesterday, falling to $1.2948, and provided an excellent opportunity for clients selling Dollars for Pounds. This was due to a number of factors, including worries over the outcome of the UK’s decision to leave the EU. Many Eastern European leaders have spoken out promising that Britain will not be able to ‘have its cake and eat it’ – that free-trade deals and immigration caps would not be a possibility if action is taken to leave the EU.

Another contributor to yesterday’s USD strength is the looming FED Interest Rate decision this evening, where although there is only a 15% chance of a rate hike, this is still a possibility.

If a hike is not announced this time, the chances are ever growing for a hike in December after the Presidential Elections, which too are causing worry. All this, combined with the Bank of England’s announcement last week that a further rate cut could be on the cards, has unnerved investors and the Pound has come under pressure. This negativity could all very easily be reversed however, as if future UK data is positive as it has been recently, the Bank of England may need to go back on their prediction, which would likely cause the Pound to strengthen.

Could the US surprise and raise Interest Rates in September?

The latest Interest Rate Decision is at 7pm this evening, and although the chances if a hike are slim, BNP Paribas and Barclays are both expecting the FED to take the plunge and raise rates. The last time the US raised rates was in December last year and caused GBP/USD rates to move by 1.75%. This was a broadly anticipated move by the FED, so if they act again this evening with the majority expecting no change, we could see huge swings on Dollar rates.

In such a volatile market, it is imperative to keep up to date with economic and political announcements, as this could make a huge difference on your currency transfer. Our brokers have an average tenure of 8 years, and are perfectly positioned to help in keeping you up to speed with the latest market movements. Please get in touch to discuss your requirements today on 0044 1494 725353, alternatively you can email me directly at ajs@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.