The Pound has begun to make some gains vs the US Dollar as it looks as though things are sorting themselves out behind the scenes with the Brexit talks.
During 2018 the US Dollar has generally speaking been going from strength to strength owing to the pace of interest rate hikes, and with the base rate now standing at 2.25% with a further hike expected we could see further Dollar strength towards the end of this year.
The Dollar’s strength is clear when you look at what is happening to USD/EUR rates, but the outlook for GBPUSD rates is not so clear.
Pound vs US Dollar – the impact of the latest Brexit news
The Pound has made some breakthroughs recently with the latest Brexit discussions and with the EU summit due to take place next week, could we see the Irish border issue concluded by then?
German leaders have warned that European trade could be seriously harmed if a no-deal Brexit takes place as Germany exports a huge amount to the UK including their very successful car market.
At this point I cannot see a no-deal situation as this would be extremely damaging for both the UK and the European Union so at some point I think a deal will be agreed and when this happens this could give huge support to the Pound against a number of major currencies including the US Dollar.
Since June 2016 when the EU Referendum vote took place the Pound has lost over 20 cents against the Greenback. Once we have some certainty this could help the Pound potentially recover some of these previous losses.
US Inflation could affect Fed’s interest rate decision
In the short term make sure you keep a close eye out on US inflation data tomorrow afternoon as this will affect the decision made by the US Federal Reserve as to what to do with interest rates. If inflation remains high I think the central bank will be left with no choice but to hike rates at their next meeting so this could cause some negative movement for GBPUSD rates tomorrow afternoon.
However, the over-riding factor will be the Brexit talks so make sure you’re well prepared for volatility in the fortnight ahead.
If you have a currency transfer to make and would like to save money on exchange rates when converting US Dollars compared to using your own bank or broker then contact me directly for a free quote and I look forward to hearing from you.