This report will discuss some of the factors that are likely to affect GBP exchange rates today, and looks at the potential impact of the US interest rate decision.

The UK economy has shown its resilience of late, following better than expected data last week. UK Retail Sales figures only dropped by 0.2% from a huge jump in July, and the UK employment rate holds steady at near decade lows. The data releases of late have highlighted the strength of the US economy, positive signs for any clients holding Sterling.

With very little data out this week from the UK, investors will be turning their focus to the US interest rate decision on Wednesday evening.

Last week the UK’s Monetary Policy Committee voted to keep rates on hold at record low levels of 0.25%, however they remained fairly firm on their stance that the Bank of England do have the capability to drop interest rates lower if need be at Novembers interest rate decision.

If the US Federal Reserve do decide to raise interest rates, then I would expect market volatility. The consensus is for Wednesday to be a non-event, with market expectations for a rate hike at this week’s meeting at around 20%. If the Fed do decide to stun the markets on Wednesday, most, if not all of its counterparts could be affected. In my personal opinion, it would be wise to speak to your account manager to discuss the options you have available to cover yourself from any adverse market movements.

This week’s events and the impact on Pound Sterling exchange rates

On Wednesday the UK’s latest public sector borrowing figures will be released. Normally, these wouldn’t have a large effect on the currency markets however it is expected to show a huge increase after the referendum and shortly afterwards, the Bank of England will release their autumn bulletin, which is likely to give an insight into developments regarding future monetary policy after the referendum.

Out of our trading hours on Wednesday night, the US Federal Reserve will deliver their latest interest rate decision. The lead up to this event has caused fireworks on the market in the past. The last time the Federal Reserve raised interest rates, GBP/USD exchange rates fell nearly 2 cents overnight. This would mean clients transferring Pounds into US Dollars would have received $2900 less. At currencies.co.uk we can put in a stop loss to automatically purchase the currency once it hits a certain rate, to prevent such losses.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me at lme@currencies.co.uk. To keep track of exchange rates visit our live foreign exchange rates page.

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.