Pound Dollar Forecast: GBP/USD Exchange Rate to Climb If Geo-Political Tensions Persist

Modified: Thursday, 12 September 2013 16:04 BST - Written by John Cameron

STORY LINK Pound Dollar Forecast: GBP/USD Exchange Rate to Climb If Geo-Political Tensions Persist

The Pound’s recent renaissance came under threat earlier today when BoE Governor Mark Carney urged vigilance regarding a potential UK property bubble. Meanwhile, the US Dollar is forecast to enjoy strong support if tensions between Russia and the West escalate.

The Pound US Dollar exchange rate (GBP/USD) is currently trading down by 0.23% at 1.5788 GBP/USD. The US Dollar Pound exchange rate is currently trading at 0.6334 USD/GBP.

Bank of England Governor Mark Carney struck a cautionary tone when he addressed the UK Parliament’s Treasury Select Committee earlier today. Many investors holding Sterling-denominated assets have been banking on a sharp rise in British property prices when the coalition government rolls out its Help to Buy scheme to non-first time property buyers next January to fuel a new boom in economic activity across all sectors.

However, Carney reminded such market participants that the Bank of England retains a ‘considerable range of policy options’ in order to avoid such a property boom. The news is likely to make the UK a less attractive venue for inward investment in the medium term, potentially causing a renewed bout of downside for the Pound. Sterling has held up reasonably well in the aftermath of Carney’s words, with the Pound euro exchange rate (GBP/EUR) continuing to loiter just below the 1.1900 threshold and Sterling US Dollar (GBP/USD) trading either side of the 1.5800 level during the European session.

Elsewhere, tensions between Russia and its Western trading partners continue to play a factor in the global currency markets. This morning’s warning from the European Union that the pressure which Moscow is bringing to bear against former Soviet nations which are attempting to join the European Union as ‘unacceptable’. The news follows continued political horse-play between Russia and the UK/USA/France axis which is supporting direct action against the Syrian regime. Ordinarily, such tensions between major global superpowers would have a tendency to trigger strong support for the world’s safe haven currencies, (CHF and USD), with the Dollar coming in for particular support. GBP USD has held steady so far today, but this situation is by no means guaranteed to persist.

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