The GBP/USD cross slipped a over a cent this afternoon after Fed Chair Janet Yellen testified in front of congress. In the early part of trading today GBP/USD rose to a high of $1.4570 but the pound could not hold onto the gains and ended the day back around $1.4475 following Ms Yellens comments.
GBP/USD exchange rate graph
What did Fed Chair Yellen say?
The dollar clawed back some ground after Ms Yellen suggested that a second rate hike is still on the cards in March.
Indicating the U.S. central bank could be willing to take further action next month has led to investor confidence returning to the dollar.
Over the past few weeks the dollar had come under some pressure as global events had lowered expectations of another hike during 2016.
Concerns over the Chinese economy, the health of the European banks and low oil prices had seen demand for the dollar fall with investors favouring other safe-haven options such as the Japanese yen and Swiss franc.
Following this afternoons comments by Ms Yellen it seems some confidence in the dollar has returned.
If Ms Yellen maintains her positive stance and does tighten monetary policy next month then we could see some turbulent times for the GBP/USD cross.
Another rate hike in the U.S. would see the dollar strengthen and could lead to GBP/USD testing the $1.40 barrier in the next few weeks.
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