US Dollar Strengthens against Sterling (Tom Holian)

US Dollar Exchange Rate Forecast: USD Remains Pressured by Fed Rate Cut Expectations

GBPUSD exchange rates have fallen by over 1% since last night after the FOMC meeting. US Fed Chair Janet Yellen suggested that interest rates could begin to rise in early 2015 once the bond-buying programme finishes. The Fed decided to keep the taper going of US$1obn per month which brings the latest change to US$55bn per month down from the high last year of US$85bn.

With interest rates in the US at historic lows the bond purchasing was aimed at keeping the US economy strong which has proved at least for the moment a good thing to do as growth has remained stable. As the US economy continues to recover this allows the Fed to continue with the taper.

Previously the Fed have suggested that interest rates would rise if unemployment hits 6.5% but has changed its stance to include many factors as a reason to change interest rates. This was taken by global investors as positive for the Dollar hence the strengthening since during today’s trading session.

Sterling has benefited against the Euro and touched 1.20 but didn’t quite hit the levels needed to really break through. This is close to the highest level in about a week. I was personally expecting to see quite a large movement yesterday during the session as we had both Bank of England minutes and also UK unemployment figures but as both came in on expectation we saw next to no movement for Sterling Euro rates yesterday.

During the Budget yesterday the UK economic growth forecast was raised which again was expected to benefit the Pound which owing to the lack of movement signals to me that there are more important data releases to watch out for during the early part of next week.

To be kept updated with exchange rates or would like to compare rates against your current provider or bank then contact me directly Tom Holian