Volatile times ahead on GBP/USD exchange rates, will the US dollar get stronger against the pound?

GBP USD Exchange Rate: The Week Ahead August 01st  

GBP/USD exchange rate: Close to best rates in 2018 selling US dollars for pounds

The GBP/USD exchange rate is currently trading on the interbank rate marginally above the 1.28 level, a not wholly unfamiliar level on the pair for regular monitors of the market in the last few months. 2018 has seen just over 16 cents movement between the high and the low on the pairing with current levels exceptionally close to the 1.2692 bottom seen in August.

There are now a series of very important political events and economic releases ahead which could have a direct influence on the GBP/USD exchange rate. I think it is going to be a very choppy few weeks ahead with some large unexpected swings as the currency markets digest these key pieces of information.

Will the US dollar get stronger against the pound?

The answer to this question is that yes, we might very well see the US dollar get stronger against the pound. The pound is currently in the firing line over Brexit uncertainties and the US economy is performing very well.

The US dollar lost significant ground earlier in the year when the GBP/USD exchange rate hit 1.43, this was mainly on the expectation the trade wars with China would prove very damaging for the US economy. The current view is that actually the trade wars are not as bad as everyone first thought, and in any event, the US economy is likely to weather the storm the ‘best’. The US economy (and therefore the US dollar), will come off the least worse from any global slowdown.

The US is also raising interest rates at a fast pace with a further hike expected in December. A higher interest rate generally makes a currency more attractive to hold and therefore increases its value.

GBP/USD Forecast: Will 1.30 be broken again?

Events begin to come very thick and fast with US Inflation data released today and then it is the end of the month where we can see month-end flows of currency creating unexpected opportunities and swings on the currency markets.

The 11th of December is a key date for the diary with the latest Brexit news and the Parliamentary vote in the House of Commons on Mrs May’s Brexit deal. It appears the most likely outcome is a vote against the UK Prime Minister, which could open up all sorts of problems for the Pound and GBP/USD exchange rates.

The end of this week also sees the G20 Summit where the Chinese Premier Xi Jinping is supposed to meet with Trump and of course the trade concerns would be discussed. This is potentially a real market mover as the current tariffs of 10% might increase to 25% in January if no progress is made.

If the UK Parliament passes Mrs May’s plans and the market becomes fearful over the negative effects from the trade wars, GBP/USD exchange rates could well breach 1.30 again. However, the sentiment does seem to be more supportive of the US dollar lately so whilst possible I expect GBP/USD rates to spend more of December below 1.30 than above it.

When should I buy pounds with US dollars?

If you have US dollars to sell for sterling, you are very close to the best rates all year. Indeed with the US possibly raising interest rates and Brexit uncertainties continuing, it might get even better for you.

Of course, the currency markets are always unpredictable and whilst we can highlight the times and reasons when we might see volatility, we can never guarantee  the outcomes.

I believe there is real value in making plans in advance to ensure that you are not caught out by any sudden changes or twists in the market. This is more so the case when you have such unpredictable events like Brexit and Donald Trump to try and second guess.

Thank you for reading and I look forward to hearing from you and discussing any possible GBP/USD transfer you might have to consider.

To discuss the factors and events that could affect GBP/USD exchange rates please use the form below to get in touch. I’ll be happy to respond personally and discuss your queries.