Over the last week we have seen the Pound weaken (Due to thin liquidity in the markets after the bank holiday) and the U.S Dollar strengthen due to strong data and economic outlook in the U.S. It seems that many analysts have misunderstood the Fed, in my opinion, it is now highly likely that the Fed will raise interest rates this year, especially after such a strong Q1. This week we saw GBPUSD exchange rates dip below 1.29- I believe we should get back to around 1.30 but as the Dollar is so strong right now, I do not foresee massive gains for GBPUSD in the near future.
Looking at the GBPEUR, the main factor right now is the Spanish elections- for those of you who aren’t aware, this is the third general election that Spain has held in the last 4 years, which is a testament to how high the uncertainty is in Spanish politics right now. It is highly unlikely that there will not be a majority win, so current PM Sanchez, may have to look to form another coalition- this may provide a boost for GBPEUR exchange rates through Monday as results come out.
Central banks in the UK & US will also be a key focus this week as both the Fed and the BoE will have their interest rate decisions- though there is no change expected for either, all eyes will be on the Fed to see if they mention anything about a future hike, and the BoE will be expected to talk about how they will react to the markets following the completion of Brexit in the coming months- the UK economy is actually performing well, and if it were not for Brexit, we would have seen an interest rate hike, or two by now.
If you are looking at making a transaction soon and are unsure about timing, please don’t hesitate to contact me to discuss solutions that can mitigate your exposure to the market.