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.

Source link   Presented by GMOTrading

Related Columns

Equity Shares and their Shared Privileges

Equity share refers to the fraction of a company's assets which gives its shareholders a part of the entrepreneurial profits, risks and ownership rights of the...

Boosting Portfolios and Terminating Risks

In today's present world condition, we can confidently say to ourselves that we are living in times of uncertainties. In the world of financial market, uncertainties...

Investing with Safety in Mind

With low-risk investment options, you have to make a compromise. Investing in them will greatly minimize any financial risk but it will also lessen your rate of return. If you are retiring...

Euro vs. USD - Two giants in one Pair

Undeniably, Euro vs U.S. Dollar (USD) currency pair has the biggest name in the world foreign exchange enterprise. Why so? Euro and USD currencies circulate in countries included in the list of...

Taking Advantage on A Bearish Market

Shorting a stock has been popular and widely accepted investment strategy in past years. It had become increasingly globally known when Bill Ackman and...

Why is dollar considered the world currency?

When we look at global financial markets, there is always a currency that dominates the scene, that is what we call a world currency or reserve currency. The most...

Pound Against Euro Pair Facts

One of the major currency pairs traded in the foreign exchange market today is the pound against euro This is because both currencies have seemingly low volatility and stability. In this article we will...

Futures Contracts And How They Work

Futures contracts are legal agreements between a buyer and a seller wherein they agree to buy or sell an asset at a predetermined price on a specific time in the future...

Futures Trading Strategies

Futures trading can be difficult if investment strategies are not defined and applied properly. Some point to the fact that futures market is also referred to as a zero sum game. This means for every profitable...