Pound to us Dollar exchange rates have hit a 4 month high against the Dollar in trading this week, as investors and speculators steer clear from the greenback due to coronavirus and political fears.
The virus really has taken hold of various States in the U.S and there are vast concerns that the current package for those out of work, costing $2.4 Trillion which is due to run out at the end of this month may not be replaced, which would be extremely negative for the U.S economy.
The U.S economy is one that very much depends on consumer spending to flourish and with reports of many workers on their knees and desperate for financial help this saga still has a lot of twists and turns ahead of it.
A recent Bloomberg article had suggested that the Dollar could lose as much as 20% of its value in the months ahead unless these issues are not properly dealt with, so if you have a large transfer involving USD or any currency pegged to the Dollar then this is a market to watch extremely closely.
Throw into the mix that there is still an election to take place in early November so there is still no real clarity on who will be steering the ship through these troubled waters over the course of next year and it does start to make the Dollar somewhat unattractive, even during these times of global uncertainty where a perceived ‘ safer haven’ such as the Dollar would more often than not gain strength.
Brexit Still Casting a Shadow Over Sterling Exchange Rates
Brexit is still clearly a key concern for investors and speculators alike, as it adds an extra element of uncertainty to what the U.K economy will look like 12 months from now.
Uncertainty can be really damaging to a currency and will often tend to investors and speculators stepping back unless they are of the riskier kind, and this drop in demand can lead to a currency falling in value.
Talks between the U.K and EU have continued each week throughout July and we are still yet no closer to a resolution if EU Chief negotiator Michel Barnier’s comments last week are to be believed. If no deal appears to have been progressed towards by September then it is likely the pound will struggle and many companies and institutions may have to start planning for the potential of no deal.
It is because of this that I actually (and I may be wrong) feel that we may have some positive news on a deal in the next 6 weeks, both sides have shown very small signs of looking to compromise and should they manage to agree on a landing zone and actually make good solid progress towards a positive outcome and a deal then sterling exchange rates could really reap the rewards.
Quiet Week for Data – Month End Flows on Friday May be Key
Looking at the economic calendar week is fairly thin on the ground for economic data asides from the U.S Federal Reserve meeting, which we will hear the results of tomorrow evening, but do be cautious of month end flows.
Friday is the last day of the trading month and on the last day of a month you can see month end flows, where exchange rates can move significantly without prior warning as funds and corporations look to net off their positions to round off their month.
With such a large move on EUR/USD over the past week these flows could lead to quite a volatile end to the week for all major currencies, which way is impossible to say.
If you do have an exchange to carry out I would suggest letting us know here at FCD so that we can keep you informed about adverse market movements so you can make an informed decision about when to trade.
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