Flash crash sinks Pound to US Dollar rates

Flash crash sinks Pound to US Dollar rates

Pound to US dollar rates suffered the effects of increasing uncertainty in financial markets as GBP/USD surged into the 1.24’s on safe haven fears. The move came overnight as auto-trades were triggered by a slump in global confidence.

The news on financial markets has been shaky to say the least as we enter 2019 with the growing threat of worsening trade wars, political uncertainties and a growing chance of a financial crisis.

Stock markets globally have been lower and it might have been some particularly bad news regarding technology company Apple which triggered the flash crash, as investors quickly sold off assets and bought into safer havens, like the US Dollar.

Clients with a position to buy or sell US dollars for pounds look set to be in for a very choppy period as the market is forced to consider an increasing number of potentially negative events.

Uncertainty as Brexit gets closer to final stages

On the UK side, Brexit is stoking investors fears as we get closer and closer to the final stages, with no clearer expectation on what Brexit will mean. Clients with a position involving sterling are at the mercy of the next twists and turns on UK politics, which is proving extremely hard to forecast.

The likelihood of the pound slipping further are high as the market is forced to take on the possibility of either a no-deal Brexit, a General Election, a second Referendum and even the possibility of Brexit being postponed through an extension of Article 50. Sterling would rise if Theresa May’s plan can be forced through Parliament, but this is looking very challenging at present.

On the dollar side the performance is more tricky to explain, since the US dollar can adopt different behaviours. As a ‘safe haven’ currency, the US dollar will often strengthen in times of economic uncertainty, as it did last night. It will also rise when there is strong economic news which will support further interest rate hikes.

Overall it seems we can paint a picture of the US dollar rising further against the pound as the market has to take stock of the uncertainty in the UK, and the various factors which appear likely to support the US dollar. The trading ranges for pound to US dollar rates could easily slip lower into the 1.20’s and getting back over 1.30 looks harder than ever at this present moment.

Last night’s flash crash underscores just how important being prepared is, to get the best pound to US dollar exchange rates. For more information on putting in plans to ensure you may capitalise on any volatility and maximise your currency exchange, please feel free to contact me directly using the form below to discuss exchange rates further.