US Dollar reaches 27 month highs against Sterling
The US dollar has strengthened against the pound of late due to several contributing factors. The Trump administration is waging trade wars on multiple fronts and usually you would expect the country currencies involved to weaken as a result. This is not happening in the US.
US Dollar benefitting from US China trade war
As global economic uncertainty increases investors are looking to put their money into US dollar safe haven investments. The US dollar is considered a safe haven currency and at present has impressive returns due to the high interest rate level, not that this is set to continue. It is anticipated the Fed could cut interest rates by the end of the year.
The high price of the dollar could soon affect exports which is why the Fed will consider making an interest rate cut. There are also worrying signs in foreign investment in US property, there has been a fall of 36% with many Chinese investors moving away from the US. Although GBP/USD is currently at a 27 month low it may be the case that the US dollar could be set to lose value.
Pound currently on a bad run of form due to Brexit uncertainty
Sterling is in a dire situation however. No PM, Brexit in limbo and now rumours of a potential general election. If Boris gains power, he has been urged to call an election while Jeremy Corbyn is considered to be the main threat. This is the last thing needs considering the current Brexit situation. Ladbrokes currently believe there is a 47% probability of a general election. If there is an election I dread to think what will happen to the pound.
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