The Pound to US Dollar exchange rate has been volatile of late, due to a culmination of both political and economic factors from both sides of the pond.
The Dollar performed extremely well last week, however it seemed to start this week on the back foot against the Pound, despite a lack of progress in Brexit negotiations and the leading political party in the UK in turmoil, which has been putting pressure on Prime Minister Theresa May to resign.
Investors wait for Fed minutes
The reason for the lacklustre performance this week so far from the Dollar can be put down to the US Federal Reserve’s minutes due tonight. It’s believed that these will investors and traders an insight into whether there will be a third and final rate hike in the US before the end of this year.
An event of such magnitude will often lead to investors ‘profit taking’ before which is why I believe that the US Dollar has weakened so far this week.
Events that could affect GBP/USD rates this week
Both the Pound and the US Dollar still have a significant number of factors that could influence their value.
Amid a lack of UK data this week, any breaking news regarding Brexit or the political situation in the UK is likely to drive GBP’s value. As for the remainder of the week, tonight we have the Federal Reserve minutes which could help to retrieve some losses for the Dollar if they continue their hawkish tone. Alternatively, if there is any concern over global outlook or the US inflation which is still below the target level, I would expect further losses for the Dollar.
Finally on Friday, keep an eye on US Consumer Price Index (CPI) data which will offer an indication of inflation and Retail Sales data that could influence the Dollar’s value.