GBP/USD Forecast – US Fed hikes interest rates by 0.25% as expected

Pound vs Dollar: US Jobless Claims rise - Will the Federal Reserve cut interest rates?

As expected, the US Fed raised interest rates again yesterday during their latest policy meeting. The 0.25% rise was widely anticipated but still helped to boost the USD value slightly.

GBP/USD exchange rates have dipped this morning, with the greenback hitting 1.3108 at its high.

The US economy continues to post impressive numbers, with this show of economic strength also helping to protect the US Dollar’s value around its current levels against Sterling.

Despite this, the Pound has at least shown some lift of late and GBPUSD is trading back above 1.30. This has turned into a key threshold for the pair, with Sterling struggling to make any aggressive in-roads above this level.

Concerns over Brexit and the UK’s long-term economic standing, both with the EU and globally, has caused investors to shy away from the Pound in recent months. Whilst so much uncertainty remains, risk appetite remains minimal and this is unlikely to facilitate any major increases in the Pound’s value against the US Dollar in my opinion, certainly in the short-term.

Looking at the US and President Trump remains in the spotlight for one reason or another. Looking purely at the economy he could argue that the impressive numbers are testament to his policies and business nous. In truth, many of the current policies were in place before his tenure and whilst I agree that his aggressive internalisation of US business is helping to boost numbers in certain sectors, it is also having a detrimental effect on others.

There is also still a lot of focus on President Trump’s escalating trade war with China and how this may negatively affect the markets.

Whilst global trade fell marginally in the wake of Trump’s initial restrictions on a host of Chinese imports to the US, it has not had the sharp decrease that some feared.

If this scenario changes over the coming weeks, then we could see the USD actually gain in value, with investors returning to its safe haven status in times of global market unrest.

Use the form below to request further information on the above or to ask another question, I’ll be happy to respond personally and discuss your enquiry.