How Will Politics Affect Pound Sterling (GBP) US Dollar Exchange Rate Outlook in 2016? Brexit a Key Factor

May 31, 2016 - Written by Minesh Chaudhari

STORY LINK How Will Politics Affect Pound Sterling (GBP) US Dollar Exchange Rate Outlook in 2016? Brexit a Key Factor

Sterling has failed to make any form of recovery against the US Dollar today, due to a continually negative situation on the homefront when it comes to the Referendum.

The Pound has crashed against the 'Buck' today, due to the latest EU Referendum poll putting 'Leave' in a dominant position.

'Cable' Exchange Rate Declined to Multi-Year Lows on 'Brexit' Uncertainty

The Pound Sterling US Dollar exchange rate loitered in the low 1.4600s GBP USD during quiet trading yesterday. However, the shift back into the middle part of the 1.4000 – 1.5000 trading range represents a marked improvement for Cable following its downward break to a fresh multi-year low in the 1.3800s, which it struck during the final week of February.

This Southward spike for GBP USD was largely fuelled by the generalised shift out of Sterling-denominated assets which followed UK Prime Minister David Cameron’s announcement of the date of the upcoming European union In / Out referendum.

The ‘Boris’ effect which saw the ‘Leave’ campaign enjoy a pronounced burst of support in the days following maverick Tory backbencher and erstwhile Mayor of London Boris Johnson’s announcement that he would be campaigning for a Brexit, sent the Pound down to bottom of the range trading rates against most of the sixteen most actively traded global currencies.

At this time, futures markets were pricing in a 40-45% chance that the UK would be voting to leave the European Union on 23 June.

US Political Uncertainty Weighs on US Dollar Exchange Rates

However, the weeks which have followed have seen the ‘Remain’ campaign wheel out a succession of big-hitting foreign leaders, including Barack Obama, Shinzo Abe and Narendra Modi, to issue dire warnings about the consequences of a vote to ‘Leave’.

These words have been backed up by reports issued by the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD) and during yesterday’s session, a stark warning from a former Director General of the World Trade Organisation (WTO). Peter Sutherland was a founder of the WTO and served as its Director General from 1993-95. His assertion that the British economy faces a ‘huge blow’ if it opts to leave the EU and that the domestic services sector, which comprises over three quarters of the UK economy, would be placed into a situation of ‘appalling complexity’ if a decision to Brexit is reached.

Meanwhile, on the other side of the Atlantic, it’s election year. If US voters opt for Donald Trump to be their next President this Winter, then the US Dollar (currency : USD) is forecast to suffer heavy losses. However, futures markets currently forecast that the controversial New York property magnate currently has only a 28% of making it into the White House.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts