GBP/USD breaks $1.28

The pound rose against the dollar last night, with the currency pair breaking the $1.28 barrier for the first time since the UK election on the 8th June.

As you can see from the graph below, the past twenty-four hours have been positive for the GBP/USD cross, with the pair rising from the low $1.27’s to $1.2815 at the time of writing.

GBP/USD graph

ADMPIC

Why has GBP/USD risen?

The rise is actually down to dollar weakness rather than sterling strength. The pound has actually lost ground against most of the other major currencies this week.

The dollar however, is suffering more than most. The greenback initially took a hit following European Central Bank (ECB) President Mario Draghi’s speech yesterday afternoon. Draghi hinted the ECB could started to unwind their aggressive stimulus programme in the not too distant future.

Things then went from bad to worse for the U.S. dollar as it lost even more ground overnight. Following Draghi’s positive comments, Deutsche Bank announced they had abandoned calls for the U.S. to climb to parity against the euro, sparking a dollar sell-off, causing the dollar’s value to fall against most of its counterparts.

Should I buy dollars now?

In my opinion it is certainly worth thinking about. The recent rise for GBP/USD is unexpected, and as I mentioned it is not because the pound is strengthening.

With Brexit negotiations in full swing, it is likely the pound will come under even more pressure in the coming weeks. It means the recent rise could well be temporary and we could easily see GBP/USD give up the ground it has made.

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Written by
Arron Morris
Senior Currency Broker
T: 01442 892 065