Cable rates seems to have bounced back from the historic lows experienced last month, with current interbank levels appearing to now sit comfortably above 1.30. More on the reasoning for this change and future monetary policy below. The table shows the range of cable rates for the past month and the potential difference in USD return.
|Currency Pair||% Change||Difference on £200,000|
The lows experienced in August saw mid-market levels drop temporarily below 1.27, the weakest the pairing has been in over 12 months.
Sterling has since responded well in light of the current strains on the currency due to Brexit uncertainty, and has seen movement of almost 6 cents over the last 5 weeks.
In monetary terms a well timed transfer could have achieved approximately $12,000 more at the better levels than could have been achieved at the worst.
As the greenback’s dominance across currency markets appears to have eased off, short term investor sentiment will likely hinge on the outcome of Wednesday afternoon’s releases, with the Federal Reserve’s interest rate decision and monetary policy statement to be announced.
Current expectations are suggesting that the FED are planning a further hike on interest rates, which could see an increase of around 0.25% to 2.25%, which was last seen in March 2008. If the result goes as expected and the FED’s economic projections provide positive sentiment for investors, I would expect a spike in USD strength which could see cable rates back below the 1.30 level.
A potential hike would in fact follow the pattern of the last 4 months, as a previous hold to interest rates was followed by a 0.25% hike which could therefore see an increase since May, of 0.5%.
This being said, a rise in interest rates will not guarantee favourable movement for USD, as highlighted last month when the UK’s Bank of England raised rates, but the rather dovish monetary policy statement that followed saw a sudden sell off for the GBP.
There will also be US GDP data released for Q2 on Thursday, in addition to inflation figures for last month on Friday. Both are expected to show positive deviations from the previous.
Clients in the market with USD could see volatility later in the week, so should keep up to date with their account manager in order to take advantage of favourable movement.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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