Gains Forecast for Pound Sterling to US Dollar GBP USD Exchange Rate as Global Share Markets Collapse

August 24, 2015 - Written by Tim Boyer

STORY LINK Gains Forecast for Pound Sterling to US Dollar GBP USD Exchange Rate as Global Share Markets Collapse

GBP to USD Currency Pair Achieves 1.58 and Settles Above Resistance

With final lingering hopes that the Federal Reserve will increase borrowing costs in September destroyed by the Black Monday chaos, the British currency was finally able to settle above key psychological resistance. The GBP/USD exchange rate briefly hit 1.58 and the pairing could rack up further gains today if the run of US reports due for release fall short of forecasts.

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This Week's 5-Day Conversion Rate Predictions for British Pound to US Dollar

Major ructions in the global financial markets throughout the past week are forecast to have a major impact on several leading currency pairs during coming sessions.

For several months now, investors have priced-in a high percentage chance that the world’s premier central bank – the US Federal Reserve – will be hiking its headline interest rate before the end of 2015. The market whispers reached their peak during the second week of July when the US Dollar (currency : USD) improved to its strongest level against the Pound Sterling (currency : GBP) since the middle part of the year. The Pound Sterling US Dollar exchange rate slumped to as low as 1.5330 at this time as Fed Chair Janet Yellen asserted that America’s rate of borrowing would be on its way upward for the first time since the 2008 / 09 global financial crisis, providing there was evidence of ‘continued improvement’ in the US jobs market.

US Interest Rate Hike Expectations Driving GBP-USD Exchange Rate Movement

However, Yellen’s prediction on US interest rates was also predicated on the expectation that the improvement in the worldwide economy which has steadily gained traction since the demise of erstwhile US investment bank Lehman Brothers, would continue. Last week’s major losses for share markets across the globe, along with the sharp drop in wholesale oil prices which saw the price of a barrel of crude drop below $40 for the first time since 2009, evidenced the fact that the global economic recovery is suffering a severe wobble. The flight to safety, which was driven by further disappointing data from China, was evidenced by a surge in demand for safe haven assets; the value of US Treasury Bills jumped by some $67bn on the week as market participants shunned risk-laden asset classes. The upshot of this alteration in investors’ expectations saw institutional investors significantly decrease their expectations of a US rate hike this year and the Buck suffered as a consequence.

Robert Tipp of Prudential Financial stated just before the weekend market shutdown, that, ‘you almost question whether the Fed has a coherent basis to hike at all. If you didn’t know that they thought we were at full employment, you really wouldn’t see any signs of it.’

GBP-USD Hits Best Conversion Rate of 1.57, More Gains Ahead?

The Pound Sterling US Dollar exchange rate broke back above the 1.5700 GBP USD threshold for the first time since 1st July during Tuesday trading and the pair threatens to settle back above this level during this week’s session. June’s peak of 1.5930 GBP USD – the pair’s 9-month high – is now forecast by many analysts to be a near-term target for the pair.

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TAGS: Currency Predictions Dollar Pound Forecasts Pound Sterling Forecasts