Poor US data, particularly lower than expected inflation weakened the US Dollar giving GBPUSD a boost prior to the Referendum. The FED's decision to keep rates on hold was put down mostly to the upcoming EU Referendum although US releases do not appear to support a hike currently.

Hold on interest rate rise but still the US Dollar strengthens

My Sterling report covered how the current uncertain climate is diverting more capital into stable currencies such as the US Dollar.

This artificial inflation of Dollar strength coincided with the US interest rate decision on Wednesday night. My colleague Joseph Wright covered the results yesterday, but since the news came out after UK markets had closed on Wednesday, the ramifications are yet to be covered.

The Dollar weakened quickly off the back of the news, bridging back above 1.42 on GBP/USD exchange rates. This was also helped by some poor US inflation data, which, at 0.2% last month, is putting the US dangerously close to deflation again.

Yet as quickly as those heartening gains for Dollar buyers arrived they evaporated. The Dollar then rallied a full percent against the Pound during afternoon’s trading, without any data to support this. This is a reflection of the sheer volume of capital waiting to be moved into safe-haven currencies at tempting rates due to the uncertainty around the Referendum. A sudden and mass Dollar purchase caused its value to temporarily spike.

Yet the currency markets are not simply beneficial to Dollar sellers at the moment. Rates are choppy, we suddenly found ourselves back well above 1.41 by close of play yesterday. Opportunities which present themselves may not be around for long, it is important to have any requirements detailed to your broker to ensure that any opportunities which present themselves are not missed.

Need to make a US Dollar currency transfer ahead of the Referendum, it may be a good idea to do so before the weekend. Call our trading floor on 01494 725 353 or email me here.

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