After dropping dramatically to its lowest point since February 1985, the Pound has been gradually recovering and at the time of writing GBP/USD is trading at 1.35.
This move upwards from last Friday mornings low of 1.3112 demonstrates that there is support for the Pound at these low levels and moving forward I predict that 1.30 will act as a support level for cable.
For as long as the rate of cable is within its current trading range of 1.31-1.35 there is a chance the low of 1.3112 could be tested again as plans for a first Interest Rate hike since December were shelved in the lead up to the EU Referendum. Should the plans of a hike resurface and particularly if the hike is carried out, the markets are likely to receive this news positively and I’d expect to see US Dollar strength.
This boost to the Dollar’s value would be across the board I predict so we could see another spike downwards in GBP/USD, so those following the rate of cable should keep a close eye on US Interest Rates and further consequences of the ‘Brexit’.
Fridays Manufacturing Figures likely to be this week’s major release
Moving forward, I expect talk of the ‘Brexit’ to continue to drive the exchange rate between GBP/USD although Fridays Manufacturing PMI data coming out of the US around 3pm UK time is likely to have an effect on USD exchange rates. The figure is expected to improve on the previous release so should the figure sway from market expectations we could see some big swings in the GBPUSD exchange rate.