A Tug of War of Pound vs Dollar

The pound vs dollar exchange rate has been on a consistent battle of push and pulls in the past two years. In mid-2016, the US dollar has enjoyed its glory days against the pound, when the British currency suffered a major blow due to the decision of the United Kingdom to withdraw from the European Union. Sterling was dragged down to as low as 1.20 dollars per pound. 

Fast forward to 2018, the tables have been turned against the dollar and the British pound is slowly constructing its road to recovery. 

Holding Tighter to the Rope 

The performance of the pound vs dollar gets really interesting for many investors. It seems that that the zenith of USD has finally reached its end while the sterling holds tighter to the rope to get its nose ahead in the competition. 

To start the year, the greenback sustained its struggles as the US dollar index that gauges the performance of USD has closed below the 90-level against major rivals for the first time in many years. 

From enjoying the 95-level in the post-Brexit vote and post-US elections, the US dollar gave up most of its strength and it looks like the downward trend will continue for a long term, with the Federal Reserve’s interest rates, the improvement in global economy, and the impact of Donald Trump’s tax reform seen as the major driver. 

Furthermore, investors have finally turned bullish on pound vs dollar and more gains are expected to come in the next weeks and months. In the last week of December last year, asset managers hailed sterling as one of the only two currencies with bullish sentiments. 

One of the main reasons why the pound vs dollar kicked off a strong start was because of fading uncertainties concerning the controversial Brexit vote. Investors cheered on the analysts’ expectations of a possible soft Brexit due to Prime Minister Theresa May’s lack of political capital. 

Another major boost to sterling’s campaign is the projected uptick in UK’s economy. Supported by a strong manufacturing, the overall economy jumped by 0.5% in the final three months of the previous year. 

With this positive momentum, the UK economy is expected to maintain its composure this year, which could support higher wages and lower unemployment rate that could fuel the demand for British pound. 

The pound vs dollar war continues. Investors should carefully inspect the market. If not, they might fall into traps they ought to avoid.