The Sterling to Dollar exchange rate has remained fairly stable in trading sessions so far this week, with the markets having wobbled slightly this time last week due to Brexit concerns along with uncertainty over the position of UK Prime Minister Theresa May.
Sterling to Dollar exchange rate sat around 1.28 levels
Having broken back through the 1.30 mark Sterling quickly retracted back against the Dollar and swiftly retraced back down into the 1.26 levels. Since then Sterling has made a slight recovery due to Theresa May continuing to remain strong, and with the potential of a vote of no confidence currently decreasing.
It had been thought that the PM would be facing a vote of no confidence and potentially could find her position as Prime Minister under threat, but currently those that have been waiting in the shadows to oppose her are struggling to get the number of letters they need, let alone being able to have enough people to vote her out should a vote of no confidence occur.
Will the Dollar weaken in 2019?
I have read a number of reports from analysts including those at Morgan Stanley and Goldman Sachs that suggest the Dollar may not remain strong for long.
Of course Brexit will have a large impact on the Sterling to Dollar exchange rate but the general feeling is that the number of US interest rate hikes may slow up next year as the US economy falls back into line, after what has been a tremendous period of growth, employment levels and of course interest rate hikes.
An interest rate hike is generally seen as positive for a currency, as it makes a currency more attractive to investors. With the Dollar being viewed as a stable currency and a safer bet than many others, the fact that the returns for investors have increased over the past year or two has then led to a flood of money moving into the Dollar.
In the age old rule of supply and demand, this has led to a higher demand for the Dollar and therefore its value has increased accordingly. What this has also led to is a flurry of money out of emerging market currencies, making them much weaker.
Where will the Sterling to Dollar exchange rate head?
My personal view on the Sterling to Dollar exchange rate is that as long as there are no major Brexit banana skins I could see the rates heading up into the mid 1.30s before Christmas, but we must be cautious that the Pound is highly susceptible to bad Brexit news or political uncertainty. This could drop the Sterling to Dollar exchange rate down into the lower 1.20s should a no deal Brexit or leadership challenge become likely.
If I had to make a prediction (which is close to impossible in this market) I feel a deal will be cobbled together eventually and the Pound will receive a solid boost off of the back of this. Also, with numerous analysts predicting Dollar weakness next year if I had Dollars to sell (or any currency pegged to the Dollar) I would be tempted to take advantage of current trading levels rather than roll the dice on what might happen with Brexit.
If you would like more information about the Sterling to Dollar exchange rate, or you need to carry out a currency exchange then feel free to contact me (Daniel Wright) directly by filling in the form below and I will be happy to speak with you personally.