Ever since the end of the past year, the USD has taken quite a beating concerning other currencies. The US economy is rife with problems with financial institutes erasing a ton of their profits, so this downfall was warranted. Yet is the time for the dollar to begin rising again has come?
There is no doubt that the USD exchange rates offer an investment opportunity for people who have strong nerves. In this article, I want to look specifically at the USD vs GBP currency pair. For anyone who’s not familiar with the acronyms, it’s the US dollar vs the Great British Pound or the English pound as it is also known.
Of course, what I write here is my opinion only and you need to make your trading decisions for yourself, but I believe that the currency 1 GBP to USD exchange rate is heading for a shift in the USD’s favour.
I make that prediction due to the financial news which is coming out of Britain and which is looking more and more ominous. It seems that the sub-prime crisis will not be limited to the US alone and that Britain, with its huge financial centre in London, is getting ready to declare some huge losses. These losses will unlikely go unnoticed in the GBP currency exchange rate. Furthermore, the housing market in the UK is undergoing a major downside. Prices have plummeted and I believe they will fall even lower. As the economy shows signs of stabilizing in the US, the tsunami hasn’t arrived at the shore of Britain. But when it does, and I have no doubt that it will, the GPB will plummet.
Therefore, it is my prediction that in the USD vs GBP battle, the dollar is going to rise and may do so substantially.
Great Britain Pound used to be one of the renowned “expensive” currency in the world. As recent as Jul 2008, it was trading at 1 GBP = 2 USD. It took a tumble during the financial crisis later in the year to a 1 GBP = 1.45 USD before recovering part of it to current levels of 1 GBP = 1.67 USD. Still one of the more “expensive” currency around though.
At current levels, UK products are considered attractive. This is especially so for products coming from retail outlets with a global presence (Marks and Spencers for example). For students who are considering studying in the United States, UK universities are an attractive alternative, due to the depreciation of the Sterling Pounds against the US Dollar. Tourists, however, will be inclined to visit the UK at this opportunity where the still attractive Sterling Pound will burn a lesser hole in the pockets. But if they want to get the most out of their money, they have travelled fast, as the Sterling Pounds will not stay this low soon.
As the US Dollar is still the current undisputed leader in currency stability, global investors are looking more to US properties due to the low valuations (property prices tumbled during the financial crisis) and stable currency. There is also the belief that US financial industries (insurance, properties and investment companies) will be “hardened” and therefore come out more reliable.
So it looks like the Greenback, as the US Dollar is dearly known, has emerged stronger from the financial crisis and is here to stay.