GBP/USD Forecast – Dollar Gains Value Following Rate Hike Comments by the FED

GBP/USD rates continue to trade comfortably below 1.30, offering excellent value to any client holding the Greenback.

The USD made small gains earlier this week having drifted back below 1.29 for a short period.

A move back towards 1.28 was likely fueled by comments made by the US FED, who indicated that they would be sticking to their guns in terms of further interest rate hikes this year.

US President Donald Trump has been vocal in his assessment of the FED’s current monetary policy stance, feeling further rate hikes would not be beneficial to the US economy. These comments have seemingly fallen on deaf ears, with the FED likely to hike rates another two times before the end of 2018.

An increased interest rate will likely attract further investors, keen to see to a greater yield on their outlay. This will generally strengthen the currency in question but on the flip side of this the market has likely priced further interest rate hikes this year, at least to some extent. If for any reason they do not occur, then we could see the Greenback lose value as USD currency positions are sold off as a result.

Another major concern for those clients holding USD is whether the current controversy surrounding Trump and the respective convictions of his ex-lawyer and campaign manager escalates further. Political uncertainty can lead to pressure on the currency in question and with this story likely to have further twists to it, it will be interesting to see how investors react over the coming days and beyond.

Looking at the UK economy, the Pound continues to be handicapped by concerns over Brexit. With no breakthrough in talks with the EU, a no-deal scenario is starting to look more and more likely. Whilst there is still hope that a deal can be struck, the current negativity surrounding the whole situation is weighing heavily on investors’ minds and this is adversely affecting any potential increases in Sterling’s value.

For more information on how political factors are likely to impact cable rates in the coming months feel free to get in touch by emailing me here.

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