GBPUSD rates are currently performing well with levels near a 3-month high once more. However, the volatility in the market remains, thanks to trade talks, Brexit, stock market turmoil and political challenges which have resulted in cable rates swinging by over 2.5% in the last 10 days giving a well-timed £200,000 transfer an extra $6,600.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD2.6%$7,050

USD stock ‘correction’ to have short-term impact on the US Dollar

The discussion with regards to future interest rate hikes has been one of the main topics recently as President Trump pushes his influence on what is supposed to be an independent Federal Reserve (FED). Last week President Trump intensified his attacks on the FED by calling them ‘crazy’. The comment by Trump I don’t think will deter the FED from future interest rate hikes, the next being expected in December as the economy in the US continues to grow with near full employment.

GBP/USD rates remain relatively rang bound despite impressive US growth In truth, GBP/USD has remained relatively range bound over recent weeks. The Pound has found plenty of support around 1.28 and above but has struggled to hold its position above 1.30, as market fears around Brexit talks and the UK’s longer-term economic standing, continue to manifest themselves. The markets are seemingly waiting for a breakthrough in Brexit talks before making their next significant move, with the current level of uncertainty unlikely to drive investor confidence substantially in the Pound. Looking at today’s economic data and US Non-Farm payroll figures are likely to take centre stage, along with their latest Unemployment figure. Those clients with a GBP/USD currency requirement should be keeping a close eye on both of these key economic releases.

Interest rates are a key driver for a currency in question so with the hike likely, demand for the USD increases as investors seek a higher return in their assets. A topic to watch going forward is the fall in stock markets recently.

Last week the Dow Jones dropped by 800 points in one day which was the largest daily fall in over 8 months, the Nasdaq also fell by over 4% and the S&P (Standard & Poor's 500 - another stock market index) went on the longest daily losing streak for nearly 2 years.

The reason for investors selling stocks came from a higher return being expected in US bonds, concerns about the trade war with China, and as interest rates climb the cost of managing debt for highly-leveraged companies also increases.

Personally, I still think it is very likely that the FED will continue with its interest rate policy and rates will climb in December. Yes, the changing forecast on the likelihood of these increases will impact GBPUSD prices in the short term. The fact remains that the FED is far more likely to raise interest rates before the Bank of England, which will continue to push the value of the dollar up making it more expensive to buy longer term.

US economic data remains strong for the US dollar

Economic data from the US also supports this argument as the economy in the US continues to expand. The US unemployment rate fell to 3.7% in September, its lowest level since 1969. Retail sales data on Monday showed another expansion in spending.

Industrial data yesterday showed a smaller number than expected, however this was put down to the summer holiday period impacting production so is more of a speed bump rather than change in direction.

Next on the horizon is the meeting minutes from the last FED decision, which are due to be released this evening. These will be keenly watched for indicators to support the current expectation for a future interest rate hike. To end the week there is Housing data and the Oil Rig count.

Generally, I personally expect USD strength to continue moving forward medium term with any real rallies for GBPUSD to be seen as a short-term opportunity rather than a long-term change in trend.

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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.