A few weeks ago, the GBPUSD level touched a 35-year low falling to 1.1433 on the interbank rate. This was in response to heightened global uncertainty over the health and economic impact of the Coronavirus.
As a safe-haven currency, the US dollar can appreciate in times of global economic concern. It was this behavior, plus the weakness of sterling which saw the moves to this record low. The current interbank rate is 1.2363, a move partly reflected by decreased global uncertainty and also a return of confidence for the pound.
There has been renewed optimism over the health of Boris Johnson who is said to be doing well despite his admission to intensive care, this has helped the pound to stabilise somewhat but there is interesting news scheduled for this evening in the form of the US Federal Reserve Meeting Minutes, from their latest interest rate decision.
The conditions that led to the GBPUSD rate reaching its record 35-year low have now changed with increased positivity towards the pound and some of the previous safe haven positions taken up on the US dollar having been sold off. That doesn’t make it impossible to revisit these levels below 1.20 but understanding why the rates are where they are can help us to make judgements on the likelihood of future levels reaching such points.
What Can We Expect From the Federal Reserve Minutes?
This evening is the latest US Federal Reserve Meeting Minutes from their latest interest rate decision. Any fresh news on the approach by the world’s largest central bank might well influence US dollar rates against the pound.
Other economic data to be considering too this week is the latest UK GDP (Gross Domestic Product) data which could well be a market mover for GBPUSD levels as investors look to better understand the impact of the Coronavirus on the UK economy.
Pound to US dollar interbank rates have risen from their lows of 1.1433, but remain below their highs of 1.3475 earlier in the year. One of the big triggers for the recent weakness on the US dollar has been the significant movements by the US government to shore up confidence with a 1.8 trillion-dollar stimulus package, it will be interesting to hear the Fed’s take on this and see what their underlying views are for the US economy ahead.
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