Last night, the US Federal Reserve released their latest interest rate decision with a mixture of opinions highlighting the potential for uncertainty ahead. The US central bank is currently in a mixed pattern with financial markets eager to understand whether there will be more interest rate cuts ahead. How could this play out for GBP/USD to exchange rates?
Pound to US Dollar exchange rate continues volatility as Brexit news emerges
The GBP/USD interbank level has seen dramatic movement between highs and the lows in the last 2 months, with the lower points this August marking some of the bottoms on pound to US dollar interbank rates, seen since the Brexit vote over 3 years ago.
The variation between 1.2023 and 1.2749 on the interbank exchange has been rather dramatic, with a move from 1.2480 down to 1.21 happening within a week. The weakness for sterling has played a part, with Brexit uncertainties harming the value of the pound. However, another key factor too has been the rise of the US dollar, as investors appetite for US dollar investments increased on the presumption that even with interest rate cuts, the US economy would weather any storm better than other leading economies.
How is the US Federal Reserve interest rate cut affecting US dollar exchange rates?
Indeed, the cuts are helping to prolong the growth in the American economy, since the rates at their current level of 2.25% are still significantly higher than the UK at 0.75%, and the Eurozone on 0%. With the Australian central bank and the New Zealand bank also cutting interest rates too, the US dollar may continue to appear the ‘best of a bad bunch’.
Economic data for the end of the week
This week will see the Jackson Hole Symposium from tomorrow, where important national leaders will share their latest views and thoughts on the global economic outlook. With increasing uncertainty throughout the world over what lies ahead, the US Dollar might be in for some volatility as the market adjusts to any shifts in sentiment.
Boris Johnson will also continue his tour of Europe, seeking to finalise his Brexit position, this might have an effect on exchange rates too. If you are looking to make any transfers and wish for the latest news, please don’t hesitate to get in touch with me to discuss further.