Pound to US Dollar exchange rate: Federal Reserve keeps rates on hold but for how long?

Pound to US Dollar exchange rate Sterling falls back below 1.25 against Dollar

When will the Fed cut interest rates?

Yesterday evening the US Federal Reserve announced that they would be keeping interest rates on hold once again. The rate is currently at 2.5% but there are signals that rates may be cut in the near future. Policy makers appear to be worried about the ongoing US China trade wars and the effect this may have on the economy.

US President Donald Trump has been putting pressure on the Fed to cut interest rates claiming that their current approach is holding back the economy. Trump also believes that the US dollar is too strong, and this will harm US exports. This is another reason why the President is in favour of an interest rate cut. Meanwhile, Fed Chair Jerome Powell has defended the Fed’s policy and claims he will not be influenced by the President.

Since last night, expectations have now risen and we could see potentially two rate cuts during 2019. This is different to the expectation at the start of this year when further rate hikes were expected. If and when the Fed starts to cut interest rates I think GBP/USD exchange rates will start to move towards 1.30. However, until we see any change don’t expect the pound to rally too much vs the US dollar.

Final two leadership candidates announced later today: How might this affect GBP/USD rates?

In the meantime, the Tory leadership election will be heating up today. By early afternoon the four candidates will be whittled down to three. Then later this afternoon the final two men to battle it out to become leader will be announced.

I think later once we have a clearer picture this could provide the pound with a boost against a number of different currencies. Therefore, if you’re in the process of buying US dollars with pounds then it may be worth seeing what happens later this afternoon.

If you have a currency transfer to make and would like to save money on exchange rates compared to using your own bank then contact me directly for a free quote, I look forward to hearing from you.