Pound to Dollar forecast: Should I buy US dollars now ?

Pound to dollar rate falls lower after stronger US inflation data

In recent weeks Pound to Dollar rates, also known as cable exchange rates, have been on the rise. To put this into monetary value a £200,000 transfer into US dollars today compared to the middle of December, now generates $12,000 more.

US Dollar weakness

The US dollar has been on the decline due to the US Government shutdown. Donald Trump shutdown part of the Government in a bid to persuade Congress to back the wall that he wants built between the US and Mexico. The shutdown lasted 35 days and was the longest shutdown in US history. For the time being the shutdown is over, however reports are suggesting the shutdown could have cost approximately $11bn.

Pound strength fading

Up until yesterday evening the pound had been strengthening due to the chances of a no deal crash out Brexit diminishing. However, last night this changed. MPs voted in favour of Graham Brady’s amendment which stated Theresa May would go back to Brussels and inform the Europeans that the backstop is not acceptable and therefore the UK need an alternative arrangement.

Now that MPs want Theresa May to renegotiate, this completely opens the door for a crash out no deal as the European leaders in Brussels have made it clear that they will not renegotiate at this stage. UK Prime Minister Theresa May will meet with Jeremy Corbyn today to discuss the ongoing Brexit saga but I don’t expect the talks to be productive and she will head to Brussels later in the week to continue the negotiation.

My personal opinion is that we will be in the same position in two weeks time and Theresa May is running down the clock. Therefore I think it’s now likely that one of three options will materialise.

  1. The UK crash out of the EU and the pound plummets in value
  2. Article 50 is extended and exchange rates remain range-bound in the high 1.20s
  3. MPs cannot come to a decision by the end of March and because there is a majority in the House to block a no deal, MPs are forced to put it back to the people. Short term I expect rates to continue to remain range-bound, and the result will dictate the value of the pound thereafter.

All in all I don’t see GBP/USD exchange rates rising much further in the short term term, therefore US dollar buyers may wish to act sooner rather than later. For more information in regards to Pound to Dollar exchange rates and a more in depth forecast feel free to feel the form in below to outline your requirements.