This report will examine the factors that could affect exchange rates this week in order to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low during the past month.
|Currency Pair||% Change||Difference on £200,000|
The USD has found plenty of support this week, despite the Dow Jones crashing by 4.6% yesterday. It has made significant inroads against Sterling, following a tough few weeks for the greenback.
GBP/USD rates dropped to 1.3833 at yesterday’s low and despite the Pound bouncing back slightly, it looks as there will once again be plenty of support for the USD at and around 1.40.
The Pound had performed impressively over the past couple of weeks, hitting 1.43 at its high, before retracting back to the current levels.
Whilst the US economy has performed well for a number of months the greenback has struggled against Sterling, failing to make inroads despite a run of positive economic data. The UK economy on the other hand remains in a state of limbo, as investors try to dissect its current standing as Brexit negotiations rumble on.
This made the recent upward curve for Sterling difficult to understand. Despite talk of a trade deal between the US and the UK post Brexit, helping to alleviate some of the pressure on the Pound, there was no real substance to the talks and many clients were questioning why the USD was losing so much value.
The answer may well lie in the strength of the US economy itself, which remains the driving force behind the global financial markets. As such the recent strength caused investor confidence to rise, which in turn increased their risk appetite.
When this occurs investors will generally move their funds away from safer haven and more stable currencies, such as the USD & CHF. They will look for higher yielding returns on riskier currencies such as the AUD & NZD, due to their potential for greater fluctuation and ultimately greater monetary returns.
This in turn would have led to the USD value dropping as funds were moved away from it but this week’s dramatic developments with the global stock markets crashing, has seemingly diluted investors risk appetite once again. This has caused the reverse effect and money has been piled back into the safe haven USD, which in in turn has strengthen the greenbacks position.
Of course there are other factors to consider, such as the on-going uncertainty around the UK and the negative effect this is having on the Pound.
However, there is no doubt that if pressure continues to grow in the global markets, the USD will undoubtedly become an even more attractive option for investors.
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