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GBP/USD hits 1.56! (Joshua Privett)
Today GBP/USD rates spiked as we received a bleaker outlook for timeline on any future US interest rate hike. While the speech was delivered with a positive tone, markets reacted poorly to the indication that the FED would not move to raise rates until they ‘see inflation returning to more normal levels’.
While Fischer, a member of the FED, stated that these current and historically low levels of inflation are ‘temporary’ and mainly due to a oil price fall, markets did not share his optimism. He is correct that current prices are tied to the current price of oil, however, the amount of time oil prices are predicted to be this low are not ‘temporary’ (at least not in my understanding of the word).
The current low price of oil is due to weakening global demand and increased production, which has created a glut. Supply is outweighing demand, and with the recent addition of Iran to the world market and slowing growth (and therefore demand for raw materials) in China, it seems difficult to understand what kind of vague timeline he was suggesting by ‘temporary’. Markets have treated currencies closely tied to the value of commodities like oil with the same regard, such as the Canadian Dollar. The current lows we have been seeing for GBP/CAD rates point to something far from temporary. Personally, it seems that the rate hike we were all expecting next month may not be coming to fruition, which is why GBP/USD rates have hit 1.56 on the market today.
This has, and will continue to be, one of the major events governing global currency markets. Almost as important as any potential ‘Grexit’. The secondary affects are staggering. As USD/EUR is the most traded currency pair in the world, sudden USD weakness causes EUR strength against most major currencies.
So those looking to complete GBP/EUR transfers will certainly be affected by these events over the next week or so as more details emerge. If the EUR continues to strengthen off the back of this pessimistic stance by the FED we may see rates dropping below 1.40.
Those with GBP/EUR or USD/GBP transfers should get in contact overnight on [email protected] to discuss how to take advantage of the current highs and achieve the best rate of exchange for your transfer. Even if your requirements are not until later in the year, these current rates can be pegged so you can avoid the inevitable volatile period to come, save money, and budget more effectively.
Source: http://www.poundsterlingforecast.com/2015/08/10/gbpusd-hits-1-56-joshua-privett/
