Pound Vs US dollar: Powell hints at a rate cut

Pound Vs US dollar

Pound Vs US Dollar exchange rates have pushed back from yesterdays low of 1.2485. GBP/USD has pushed back through 1.25. This comes following comments from the Fed Chairman Jerome Powell.

He indicated in his speech that the current US/China trade war was a major reason for this. He felt a interest rate cut at the Feds next meeting will be seriously considered. This would be the first cut in a decade.

Many analysts were arguing that they felt it was too early for the Fed to look at cutting the base rate from its current level of 2.5%. Powell’s comments seem to buck these thoughts. The market appears to be now pricing a cut on the 31st July.

Will the US Dollar weaken?

Overnight we have seen the US dollar fall in value. Although many analysts thought it was too early for a rate cut, it is still not a major surprise it could happen. Therefore I do not feel we will see any significant devaluation for the US dollar with Brexit and political instability in the UK still set to dominate the GBP/USD pair.

Avoiding adverse exchange rate movements

Current sterling exchange rates are precariously placed and vulnerable to some significant downside losses. Particularly if we leave the European Union without a deal. With this in mind, anyone purchasing property in the Eurozone or elsewhere in the coming months, should take steps to ensure that a sudden movement in the value of the Pound doesn’t increase the cost of your property unnecessarily.

A popular option is to freeze the rate using a Forward Contract. This is usually done when you have paid your deposit. This contract guarantees the price you will be paying in Pounds. A 10% deposit is required, and your rate is fixed for up to 2 years. Those less risk averse that want to take the chance of rates improving should Brexit be resolved, can use Stop Loss and Limit Orders.

These instruct your broker to purchase your currency if it reaches a particular level, or starts to drop. This allows you to take advantage of any gains while not leaving yourself exposed to a sudden drop in the rate. These types of tools, along with exchange rates that are significantly better than your bank may offer, are why many people choose to take advantage of the services we can offer. On large transfers the saving usually run into thousands of Pounds.

To find out more about how we can help you save money on currency transfers, get in touch today.

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