The “Pound-Dollar” or GBP/USD pair is a major currency pair. Both the British Pound (GBP) and the US Dollar (USD) are popular currencies. Their typical day-to-day over-the-counter (OTC) turnovers, in 2016, are US$649billion and US$4,438 billion respectively. Of these two major currencies, the US Dollar is more extensively traded. It accounted for close to 88% of the OTC foreign exchange market in 2016. It’s second in its trading capacity among the major currency pairs to the EUR/USD.
During the same period, the pound accounted for a total of 13% of the market. The sizeable trading levels between these major two economies lead to the necessity of hedging against the various risks with foreign exchange. The USD’s liquidity, and to a less degree, the GBP, additionally helps to make the currency pair an appealing forex trading pair for the retail foreign exchange traders. The currency pair’s volatility over the past ten weeks was roughly 1.01%. The currency pair moved by 125.84 pips over that period.
On Friday, March 3rd, 2017, the GBP/USD pair closed the trading day at 1.2291. It had a gain of 0.20% extra over the prior closing of 1.2267 (Bloomberg).
Key Influences on the GBP/USD Pair
In the way that it’s with most of the currency pairs, both the economies of Great Britain and the US, have a considerable impact on the exchange rate. Since the US economy is anticipated to go through serious adjustments in 2017 and beyond due to the Trump’s new administration, the GBP/USD pair is similarly expected to change as a result of the current economic conditions.
Also, the US Federal government’s policies regarding the interest rate are expected to have an impact this currency pair. Likewise, during 2017, Brexit’s still believed to have an effect on the rate of exchange between the Great Britain pound and the United States dollar.
It’s known that political events have an impact on currency exchange rates. For example, in the week after the Trump’s inauguration as president in January 2017, there was a sharp drop in the exchange rate of the GBP/USD pair. This drop was following considerable uncertainty regarding the US economy. While the GBP started to strengthen, the USD fell sharply.
These are the factors which could have a significant impact the GBP/USD pair during 2017, including:
- The policies of the United States Federal government with regards to interest rates, the US economy’s performance under President Trump’s new leadership, and the decision about Brexit.
- There has been hinting by US Federal government at the likelihood of three interest rate increases in 2017. The increased interest rates in the US will favour investment in US. It will trigger an increase in demand for the USD, with all other things being equal. The trade and immigration policies of President Trump could possibly spark inflation and increase wages.
- There is more clarity regarding the crucial impacts on this currency pair that will be achieved as the year develops.
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