Sally Redux

We are moving back next month from the US and would ideally like to take the equity from our house sale with is, but the exchange rate seems a little unfavourable at the moment.

Just wondered if anyone is more knowledgeable on the subject than I am (not difficult) and has any insight as to where the US dollar/GB pound are headed?

Pulaski

Well the UK economic data has been strong recently, and a news report today said that the UK is expecting to show the strongest growth in the G7. Conversely US economic data has been weak, weaker than expected, and the political gridlock in DC seems to rule out any dramatic shifts in economic policy. Worse (for you) economically there is some indication that the Republicans will again make midterm gains, perhaps leading to a congress united against the President. In short, other things being equal, the trend for the next 6-12 months is IMO for GBP to strengthen further.

However things that could see a strengthening of the USD are numerous, including stronger than currently expected economic data, or major global events which tend to see money flow into the US for security. Events that could cause the USD to rise include a full blown war in Israel, a war in Ukraine, a further spiralling of violence in Syria-Iraq, a major economic hiccough in Europe, where just a couple of weeks ago "Euro-jitters" broke out again, or all manner of unforeseeable crises, for example in the second tier economies the BRIC (Brazil, Russia, India, China) countries. An unexpected outcome for the Scottish referendum could also severally dent the GBP, if only for reasons of uncertainty.

On balance I think, personally, without a geo-political hiccough, the GBP will continue to trend upwards perhaps to $1.75 by the year end and $1.80 a year from now. But then I'm not a currency trader, and even the big banks are notoriously bad at trading currencies for profit, because they have no clue about the future FX rates either ..... maybe I should become an FX trader!

If you need your money you might consider moving it sooner rather than later, though you could fudge a bit and move some now, some later, and some next year, which would guarantee you wouldn't get the best possible rate, but would also guarantee you wouldn't get the worst possible rate either, it would just flatten out the peaks and troughs a bit.

If you want to Google other information on the GBP USD FX rate there are loads of sites, each with a different opinion, if you search for <usd gbp predictions>.

alfista1

I got a good rate on Tansferwise. The only one that dealed with my country also! Very easy and completed the wire transfer in 12 hours (from my bank to them and then to the UK).

I got 1.68 in June.

Didn't need to speak with anyone, just set it all up online.

lansbury

Did you read Sally's post, she is moving back to the UK and wants to change dollars into pounds. $1.68 to the £1 is not a good exchange rate in that direction.

Pulaski

It's better than the best rates available today! The dollar has slid over the past few weeks.

lansbury

Yes but bad just got worse. A good exchange rate going to the UK IMHO is around $1.50.

I agree with your other post about it continuing to go up. But then I believed the so called experts who were saying the end of last year it would be about $1.50 this year, and acted accordingly. It is true you can't beat the currency markets.

Sally Redux

Thanks folks, 'tis as I thought, looks like the pound will continue to strengthen.

Cheers.

alfista1

I haven't seen 1.5 for many years.
I'd be happy with 1.68.

Locally here it was 1.92 (post office) when I arrived a week later!!
I was chuffed with 1.68.

lansbury

It was in the low 1.50s April last year.

bigglesworth

The Five Year average (i.e. since the 2008/9 collapse) has been about 1.60. The ten year average is about 1.70 and the thirty year average is also about 1.70.
What that suggests is that, all things being equal, you are unlikely to better current rates significantly.
As an ex trader, there is quite a useful dictum, "The trend is your friend". The trouble is, there isn't really one at the moment.

One of the really interesting things that has been happening in the foreign exchange markets (apart from the big banks trying to fix daily prices, which was as plain as a pikestaff to anyone who knows about markets, but completely unnoticed by the regulators) is the rundown in the percentage of foreign exchange reserves accounted for by the dollar over recent years. Not as much as some think, but still significant.

Whether you agree or not with the reserve currency status, IMO in the short term at least events in Ukraine and the Middle East are going to make people question whether that was sensible. So dollar strength is quite possible. Especially given that the economic effect of sanctions against Russia would be overwhelmingly felt in Europe rather than the USA

jmood

Why don't I understand any of that?

Sally Redux

I read it a few times but...

Pulaski

If I might translate:

For many decades the governments of most countries around the world kept their piggy banks full of USD, which kept the dollar strong, and especially so in times of war, unrest, or (bizarrely) economic uncertainty. So the USD was relatively strong even when the US economy was in the tank in 2008-2010! This is because the USD is serving two largely unrelated purposes: as a day to day currency for retail and commerce in the US and around the world, and as a holder of value (savings) for the world's central banks. Both purposes affect the value of the USD but often in contradictory ways.

Anyhow, be that as it may, in recent years countries have been holding fewer USD in their piggy banks, and holding euros, yen, and increasingly Chinese remnimbi, so the USD is not as strong as it was.

jmood

So THAT'S what it meant! Thank you! Simple enough

So then, this part: "in the short term at least events in Ukraine and the Middle East are going to make people question whether that was sensible. So dollar strength is quite possible. Especially given that the economic effect of sanctions against Russia would be overwhelmingly felt in Europe rather than the USA"

Whether what was sensible?
Is he saying these events will serve to strengthen the $? Why, how does it relate to what you've explained?

Pulaski

Whether giving up part of their USD savings for other currencies was sensible?
Yes, that countries might go back to holding more USD, thereby strengthening the dollar.

IIRC something like 80% of USD currency is held outside the US, much of it held in bank vaults, safes, and stuffed into mattresses or buried in the ground. Each year the US exports something like US$5Bn of paper money, 90% in US$100 bills. Each bill, each piece of paper, costs something like 3¢ to print, and yet the US government get $100 of foreign currency in exchange for it! ..... Paper currency is mostly smoke and mirrors.