US Dollar gains in value after Yellen speech

The US Dollar spent most of yesterday increasing in price, as the evening speech by Federal Reserve Chairman, Janet Yellen, confirmed that US interest rate rises are still likely before the end of 2015.

Ms Yellen said in her speech that US economic prospects “generally appear solid” and that she would anticipate an “increase in the federal funds rate later this year”. This is all bad news for those of you looking to send money to the USA, as interest rate rises in the States are very likely to happen before we see the same in the UK and Europe, which will favour US Dollar investments and likely increase the price of the Greenback.

In fact the price of a US Dollar has increased by nearly 3% in the last week, giving us the worst GBP-USD rates since May. There could be further movement to come if the Bank of England continue to delay interest rates here in the midst of mixed economic data and stagnant inflation.

Euro rates also fall further

In a particularly bad day for the Pound, we also saw GBPEUR rates falling to their worst since May, as emergency borrowing by European banks fell sharply, adding confidence to the single currency bloc. The Pound now buys €0.03 less than at the beginning of the week – adding over £3,000 to the cost of a €150,000 purchase.

Doom and gloom to continue?

With exchange rates falling for sterling against the majors of the USD and Euro, it is tempting to decide to wait if you have a major purchase coming up. But there is no guarantee that things will improve, specially now the Greek debt crisis has faded from the headlines and with interest rate rises looming in the USA. Unless we start seeing some very positive UK economic data, the Pound could have much further to fall, so consider hedging your position with a fixed exchange rate for some or all of your upcoming purchase.

Today we have no major data due out except US GDP at 1330, and there is little out early next week as we approach the month end, except Eurozone inflation on Wednesday.