Pound to US Dollar forecast: Bets increase on 50 basis point interest rate cut from the Fed – What could happen to GBP/USD?

Recent performance of the USD

The pound to US dollar exchange rate has fallen as the US dollar has had a terrific run of form against most major currencies, seeing gains against most majors once again over the past few weeks. There are a number of analysts who are now starting to question whether or not the dollar has any further to go or if we may be close to seeing the US dollar exchange rate start to turn back again.

US Federal Reserve expected to cut interest rates in the coming months

Expectations are that there will now be a cut at the next Fed meeting at the end of the month, but what will be most interesting to investors and speculators is how much the cut is by. Bets have increased on a 50 basis point cut which would be seen as a bold move and may weaken the Dollar shortly after it is announced.

An interest rate cut is generally seen as a negative for a currency as it can make it less attractive to investors. One of the reasons the dollar has been gaining strength consistently is due to a number of rate hikes over the past two years. This has led to a flow of money out of emerging markets and perceived ‘risky’ currencies as the dollar has offered a decent rate of return in what has been well known as a safer haven currency. US economic data has shown a slight downturn in recent weeks and with pressure on the Federal Reserve from President Trump to look at cutting rates it appears they finally may have no choice but to make their move.

New UK Prime Minister: How could this affect GBP/USD exchange rates?

As far as the pound and UK is concerned, expectations of a new Prime Minister to come in next week may give the pound a slight uplift thanks to a little certainty, but realistically it will be Brexit progression (or the lack of it) that will be the main driver for sterling exchange rates.

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