- 31-year low for GBPUSD post-Brexit
- Brexit uncertainty continues
- FED hikes unlikely this year
- US Presidential election
Pound to US Dollar exchange rates grew 3 cents in the last 24 hours, its biggest ever growth since the news of Brexit. Last week Pound Sterling fell to a 31-year low against the US Dollar raising concerns that further losses could be on the horizon.
It would appear that the news of Theresa May becoming the next Prime Minister was seen as positive for the Pound, although news this morning that she will hold off on Article 50 until next year only adds further to the uncertainty.
So when will be a good time to buy US Dollars? Let’s explore some upcoming events that could provide us with some clues.
FED Interest rate hikes
I remain sceptical that an Interest rate hike will happen this year, the news of Brexit would likely have made FED Chairlady Janet Yellen nervous. Despite positive Non-farm payroll figures released last week, economic releases for the US remain mixed coupled with the upcoming Presidential election.
I therefore do not expect an Interest rate hike until 2017 which could impact US Dollar strength as we approach the latter part of the year.
US Presidential election
The latest US presidential election is turning out to be one of the most controversial in history. Donald Trump has made ongoing controversial comments surrounding immigration, abortion and gun control. Hilary Clinton’s association with husband Bill Clinton and email scandal make her less popular amongst American’s.
That being said Hilary Clinton has political experience that Donald Trump lacks, Clinton as President could be seen as safer for investors.
Either way general and presidential elections tend to create volatility in markets which could give Sterling a helping hand as we approach November.
US economic outlook
Economic releases will be scrutinized given Yellen’s recent meeting with congress. Her outlook remained dovish about the economy and despite positive Non-Farm figures on Friday, there are still reasons to remain cautious.
10 year bonds continue to decline, the US Labor market remains unsteady and inflation remains well below the 2% target set out by the FED. All of which was happening prior to the Brexit vote.
It’s likely that GBPUSD exchange rates will remain on the lower side until Brexit negotiations take place, there will however be windows of opportunity in the mean-time so keep an eye on economic releases, FED meetings and the run up to the Presidential election.