British GBP/USD: USD Exchange Rates Could Strengthen For Remainder of 2014

At the time of writing the following rates are on offer:

• The euro dollar exchange rate (EUR/USD) is unchanged on last night's close at 1.3549.
• The pound dollar rate is 0.08 pct lower at 1.6953.
• The US to Canadian dollar rate is 0.04 pct higher at 1.0867.
• The US dollar to Aus dollar is unchanged at 0.9338.

If you are holding out for better rates, or afraid of a further deterioration in the FX pair you are watching, then consider getting an independent FX firm to help set up a risk management strategy. They will also be able to deliver up to 5% more currency than your bank would typically deliver on execution.

Near-Term Outlook: Watch the FOCM Minutes

The FOMC meeting this evening is the main focus today.

"With the USD bulls encouraged by yesterday’s slightly firmer CPI data, the USD may press the upside today, but we doubt it will break recent ranges ahead of the meeting," say Lloyds Bank Research.

Certainly, those who watch yield spreads have every reason to be USD positive, especially against the EUR, as the combination of higher short term USD rates, lower EUR rates after the ECB rate cuts and a widening of cross currency basis have led to a very sharp move in forward points in favour of the USD suggest Lloyds.

Medium-Term Outlook for the US Dollar: Support Ahead

The dollar has risen against the euro over the past month but its effective rate is little changed. Meanwhile some decent gains against the British pound seen over recent weeks were rudely reversed in the latter sessions of the past week.

The USD fell modestly in early May as weak Q1 GDP data and continued dovish comments by Federal Reserve officials reinforced the impression that interest rates would remain very low.

"However, the currency rebounded in the second half of the month and into early June. This was in part due to stronger economic data, but much of the impetus came from growing optimism over the extent to which the ECB would ease policy at its June meeting," say Lloyds Bank Research in a currency outlook note to clients.

In fact, markets were underwhelmed by the ECB’s announcement and the USD sold-off modestly following the meeting.

Nevertheless, the dollar should enjoy the remainder of 2014 say Lloyds:

"We continue to expect that signs of strengthening US activity and expectations of higher interest rates will push the dollar higher in the year ahead."

Piet Lammens at KBC Markets is meanwhile of a similar opinion saying recent weakness in the pound dollar rate is unlikely to persist:

"Cable is heading to the 1.70 level. The picture in this cross rate has improved, too and a break is well possible especially as the dollar isn’t really in good shape. However, in a longer term perspective, we are more neutral on the upside potential for cable."

Meanwhile, from a technical perspective, Karen Jones at Commerzbank tells us the outlook for the euro dollar is negative:

"EUR/USD remains on the defensive but appears to lacking impetus to break last weeks low of 1.3503 and we suspect the market is pausing ahead of this years low at 1.3476 and the 2012-2014 uptrend at 1.3439.

"This is considered to be a key break down point for a slide to 1.2750. The intraday charts are more neutral to negative. They indicate that intraday rallies are likely to terminate circa 1.3555/70."

Weekend market and business news snapshot

Standard & Poor's upgrades prospects for the U.K. economy: A credit rating agency has upgraded its opinion of the future prospects for the U.K. economy in light of the "robust and broadening" recovery.

Fitch keeps U.K. rating on hold at AA+: Credit ratings agency Fitch has held the U.K.’s rating at AA+ citing respectable economic growth and an improving labour market.

Markets bet on rate rise this year after hawkish Carney intervention: Traders are now pricing in a rise in rates from the Bank of England before the end of the year, as financial markets were sent scrambling yesterday by Mark Carney’s unexpected shift on the timing of monetary tightening.

Oil price surges as chaos in Iraq raises fears for supplies: Iraq’s descent into chaos sent the oil price surging to a nine-month high as the threat of disrupted supplies panicked markets.

Recruitment Boss Alistair Cox slams Britain's visa hurdles: Britain’s biggest recruiter has warned that U.K.’s “arbitrary hurdles” around immigration were damaging economic growth and forcing firms to relocate overseas to find skilled workers.

Bonmarche sees 66% increase in profits in maiden results: Bonmarche has reported a 66% jump in annual profit in its first set of full-year results as a public company.