Pound to US Dollar exchange rate: Investors back the US Dollar
The US dollar has been in the ascendancy lately, as investors back the currency against all others. This is especially true of the US dollar against sterling, as the British currency suffers under Brexit uncertainties. GBP/USD levels had dipped into the 1.25’s but have staged a late recovery back over 1.25 in the day, as Jerome Powell, the US Federal Reserve Chairman, lines up the possibility of further interest rate cuts. GBP/USD levels still remain in the territory of the best time in 2 years to sell US dollars for pounds, what can we expect next?
Fed interest rate cut looks to further support strong US economy: Will USD rates continue to rise?
On the US currency side, it might be fair to say that cutting interest rates will weaken the currency, and the possibility of such a trend has been loosely re-established this afternoon, following the Jerome Powell’s comments. However, one of the reasons the US dollar has risen so much is that investors have embraced the cuts to the extent that, by cutting interest rates, the US is positioning itself to keep its economy strong and growing in the future. Recent jobs data for the US showed strong employment data which is further supportive of the economy and with the Fed now appearing inclined to cut on the 31st July, when they next meet, the economy should remain resilient and the currency strong.
US interest rates are still the highest of the world’s leading economies which will I am sure provide confidence for investors to keep backing the US dollar for a higher return on their investments. The future looks like it will prove beneficial for the US currency even with interest rate cuts ahead. Recent uncertainty over the US trade wars with China have even gently subsided, as investors have reasons to be optimistic over the more immediate outlook.
Brexit uncertainties remain: Sterling weakness likely to continue
On the British side, Brexit uncertainties look set to remain which will only keep pressure on the pound. Sterling is unlikely to be rising dramatically until there is some kind of clarity on Brexit which does not appear forthcoming. Having said that, the upcoming Conservative leadership race could provide further confidence for sterling but ultimately, the prospect of no-deal has probably risen as both Hunt and Boris are openly backing a no-deal option, something which has been closely associated with sterling weakness.
GBP/USD levels could now remain anchored in the 1.20’s according to some commentators, including Lee Hardman of MUFG, a Japanese Bank, who said in the FT yesterday that the recent fall below 1.25 could open the door to the 1.20 level.
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