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Pound Reaches 7-Week High Versus US Dollar, Could Fly Even Higher

Market CommentaryPound Reaches 7-Week High Versus US Dollar, Could Fly Even Higher
The pound to US dollar interbank exchange rate has hit 1.4174 today, its highest since February 1st, as the Federal Reserve signalled yesterday that it will hike US interest rates just 2 more times in 2018. Image credit: Trish Parisy.
The pound to US dollar interbank exchange rate has hit 1.4174 today, its highest since February 1st, as the Federal Reserve signalled yesterday that it will hike US interest rates just 2 more times in 2018. Image credit: Trish Parisy.

by Peter Lavelle

Welcome to Pure FX’s latest update of the pound to US dollar interbank exchange rate.

This tells you when it’s a favourable time to exchange pounds to US dollars, for your money transfer!

Sterling stands taller versus the greenback! The pound to US dollar interbank exchange rate has hit 1.4174 today, its strongest in 7 weeks, or since February 1st.

The pound has jumped against the US dollar, because yesterday America’s central bank, the Federal Reserve, signalled that it will lift US interest rates only twice more this year.

The US dollar has lost out, as even though the Fed hiked US interest rates by +0.25% to 1.75% on Wednesday, the Fed also indicated that it will only hike 2 more times in 2018, up to 2.25%.

This has weighed on the buck, first because though the Fed lifted US interest rates yesterday, the financial markets had already “priced in” this hike into the value of the dollar.

This has also dragged down the greenback, because the Fed disappointed international money managers, who thought that the Fed might signal 3 more hikes this year, up to 2.5%.

Lastly, this has weakened the US dollar, because when America’s central bank keeps US interest rates lower for longer, this makes investing in US financial assets less profitable!

US dollar falls, as Fed “worried” about trade war

Moreover, the pound has also hit this 7-week high versus the US dollar, because the Federal Reserve voiced concerns yesterday about President Donald Trump’s proposed trade tariffs.

The US dollar has struggled, because the Fed has been “hearing from corporate officials who are worried about the Trump administration’s trade actions,” said the central bank on Wednesday.

In particular, in the past fortnight President Trump has announced tariffs on steel and aluminium on major US allies, including the UK, EU and Japan, thereby weakening the greenback.

Furthermore, it’s thought that Mr. Trump will also announce a series of tariffs on Chinese goods today, sparking fears of a trade war with China, and dragging down the buck.

On Wednesday, US Treasury Secretary Steven Mnuchin said that he’s planned investment restrictions on China for President Trump to consider too, thus also hurting the US dollar.

With all this in mind, the pound has strengthened against the US dollar, and could rise higher!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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