The US dollar vs pound interbank exchange rate stands at 0.8007 today. This is its highest in 27 months, or since April 9th 2017.
By contrast, back on February 28th 2019, the US dollar was as low as 0.7509 versus the pound. So it's since risen by close to +5 cents, or by +6.63%.
This may be helpful information for you, if you're a Brit selling property abroad in the USA, or an American business owner importing UK products.
This is because, when you transfer money to the UK, you might now get a higher British sterling total, compared to if you'd transferred money in the past two years.
In turn, this would make it more profitable for you to repatriate the funds from your property sale to the UK, or cut your international payments costs for your company.
To stay up-to-date with the US dollar vs pound interbank exchange rate, visit Pure FX's Rates & Tools page. Here, select 'USD' to 'GBP' to see the last week's exchange rates.
Also, to check what's affecting the value of the mighty buck versus sterling, visit our USD to GBP Exchange Rate Updates page. Simply click on the latest article.
A first reason why the US dollar vs pound interbank exchange rate has hit this 27-month high is because the USA created far more jobs than forecast in June, said official statistics last Friday.
A second factor why the USD has strengthened against the GBP is because, what with America's labour market strong, the Federal Reserve could be less likely to cut US interest rates.
A third explanation why the greenback has reached this 27-month high versus British sterling is because it's thought that the next UK Prime Minister may have to call an election in 2019.
Let's look more closely at these reasons why the US dollar vs pound interbank exchange rate has risen. You might find this helpful, for when you decide to transfer money to the UK.
US Dollar Vs Pound Rises, as US Job Creation Beats Forecasts in June
As I mention, a first reason why the US dollar has reached this 27-month high versus the British pound sterling is because the United States created more new jobs than expected last month.
According to the US Department of Labor last Friday 5th July, the USA created 224,000 jobs in June. This is well above economists' forecasts for 160,000 new posts, plus May's figure of 72,000.
In addition, although the USA's unemployment rate rose by +0.1% in June, to 3.7%, this was for positive reasons. In particular, more inactive Americans joined the workforce, to look for employment.
This suggests that more US citizens feel optimistic about the possibility of finding work. So this is good for America's economy, even though the unemployment rate is higher.
Also, wages in America rose by a healthy +3.1% in June compared to a year ago. This was below financial markets' forecasts for +3.2%. However, this is still comfortably above America's inflation rate of +1.6%.
So this tells us that American workers' salaries are increasing faster than prices. This makes Americans feel richer, and contributes to the USA's prosperity.
These positive US job creation statistics have strengthened the US dollar, because they're a clear rebound, following May's figure of just 72,000 new jobs.
This has relieved economists, who'd feared that America's economy could be slowing down, following months of trade disputes with China, Mexico and the Eurozone. These data tell us that the USA remains resilient.
USD to GBP Exchange Rate Climbs, as Fed Less Likely to Cut Interest Rates
In addition, another factor why the US dollar vs pound interbank exchange rate has reached this 27-month high is because, what with America's job market in the pink, it looks increasingly unlikely that the USA's central bank, the Federal Reserve, will cut interest rates later in July.
At present, the Fed's interest rates stands at 2.25-2.5%, among the highest in the industrialised world.
The Fed looks less likely to cut interest rates, because what with America creating lots of jobs, the USA doesn't need more monetary support to prosper.
When the US central bank cuts interest rates, this makes it cheaper to take out business loans or mortgages. This helps stimulate economic growth. However, it seems that the USA's economy remains sturdy as it is.
What's more, there are other signs that America's economy is doing well with interest rates as they are. For example, the USA's stock markets, like the S&P 500, NASDAQ and Dow Jones are all reaching new record highs.
Meanwhile, last week US President Donald Trump and Chinese leader Xi Jinping reached a temporary truce in their ongoing trade dispute.
For instance, these things "would seem to make a mockery of market expectations that the Fed will cut interest rates by up to 50bp late this month," says Andrew Hunter at Capital Economics, on the Financial Times’ website.
When the Fed keeps interest rates stable, this lifts global money managers' returns for buying American assets. In turn, this lifts demand for the US dollar, and its value.
Later this week, we'll learn more about whether the Fed intends to cut interest rates in 2019. Central bank Chairman Jerome Powell will give his semi-annual testimony to the Congress and Senate committees, on Wednesday and Thursday.
If Mr. Powell suggests that the Fed could keep interest rates stable, following the recent optimistic data, this may influence the US dollar further.
US Dollar Gains Versus Pound, as UK Election in 2019 Likelier
Also, another partial explanation why the US dollar vs pound interbank exchange rate has strengthened is because it's thought increasingly likely that there'll be a general election in the UK in 2019.
This may happen, either if the next Prime Minister, who'll probably be Boris Johnson, wants to increase his Parliamentary majority, or to demonstrate support for a 'No Deal' Brexit among voters.
According to the financial markets, there's now a 22% chance of a UK general election this year. In particular, this is because it's thought that, if Mr. Johnson attempts a 'No Deal' Brexit, MPs may rebel against him, including in Mr. Johnson's Conservative Party.
At present, the Tories have a majority of just four MPs. So Mr. Johnson might have to go to the polls to secure a larger majority.
It's likely that MPs would oppose Mr. Johnson if he attempts a 'No Deal' Brexit, first, because the House of Commons has already voted against a 'No Deal' several times.
Second, Chancellor Philip Hammond has won the support of up to 30 Conservative MPs to block a 'No Deal' Brexit, reports Sky News. So the future Prime Minister may have no choice but to go to the voting public.
For example, Gillian Keegan, the Conservative MP for Chichester, told the Financial Times newspaper last Friday that: “There’s a scenario [where] an election could be called in early October. There are a lot of people who think there will be an autumn election.”
So MPs in the House of Commons are preparing for the possibility of an election in the next few months.
However, although Mr. Johnson might call an election to win a larger majority and support for a 'No Deal' Brexit, there's no guarantee he'll get these things.
Alternatively, Jeremy Corbyn's Labour Party could win the election. Or the resurgent Liberal Democrats or Nigel Farage's Brexit Party could win more MPs. A general election contributes to the UK's Brexit uncertainty.
As a result, the pound has weakened, as the financial markets factor in the rising probability of a UK general election in 2019.
This is because, though a future Prime Minister Boris Johnson might call a general election to win support for a 'No Deal' Brexit, there's no telling if he'll get it.
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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 [email protected]