The FOMC (Federal Open Market Committee) Minutes revealed several Fed members believed a rate hike was needed ‘very soon’ increasing expectation of a hike in December. This expectation has been a big driver on GBP USD exchange rates for the last couple of years as markets gently price in the prospect of a higher base rate down the line.
Unfortunately the real attraction for global audiences in the United States is the Trump show! Further allegations of poor treatment of women including groping as well the infamous ‘grabbing’ claims have seen Trump now trailing by 8-10 points according to the various polls. Unsurprisingly he is losing the most support from women although many members of his own party, the Republicans have publicly criticised him and withdrawn support.
I am reminded of the Brexit vote where the day before it looked almost guaranteed that the UK would vote Remain. Nothing should be taken too much for granted and we should always expect the unexpected on exchange rates and in particular from Donald Trump.
The pound to US Dollar rate has broken new territory hitting less than 1.20 at times in this last week. Interest rates have of course been a big driver on the US Dollar, the prospect of a higher Interest Rate has led to the US Dollar rising against all currencies notably sterling.
It is difficult to see GBP USD rising significantly, some of the major banks are predicting GBP USD could drop to 1.10 in the coming weeks and months. Such a move would have been unthinkable a few weeks ago, it is now a very real prospect, much like a Trump Presidency or even candidacy imagined earlier this year.
With so much going on to move rates on both sides of the Atlantic GBP USD buyers and sellers will have many weeks to go to find out the answers to these questions, assessing the performance in recent weeks overall I expect the USD to outperform the pound.
Those looking to buy US Dollars should consider the potential implications of a FED interest rate hike on GBP USD. Get in touch with your broker today on 01494 725 353 if you would like to discuss your US Dollar buying requirement.
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