The Reaction of the British Pound to the US Dollar at the Start of August

Posted by Allison on 15 August 2011, 14:01

One of the biggest financial news stories to break in recent weeks has been the announcement of the US having its credit rating downgraded. You would expect the British pound to try and capitalise on this news by increasing its value against the US dollar. The figure it was able to claim on the currency converter at the end of July was 1.6299. So could it improve on this as the news broke about the downgrade?

As the US was close to reaching an agreement on raising its debt ceiling, the pound was also busy increasing its value to claim a rate of 1.6389 to kick off August. When this dropped back to 1.6253 the next day, it was clear that it was going to be a tougher fight that we at first thought.

The pound managed to get back into 1.63 territory throughout that first week of August, but eventually the week closed on a rate of 1.6287. However the pound launched into week two with renewed confidence, sporting a closing rate on day one of 1.6367. This was starting to look a little more promising. But if we have learned anything over these last few months it is that you just never know what will happen next. Indeed, this was borne out once again during the next few days.

We watched as the exchange rate between the pound and the dollar started to slide once more, going in favour of the US dollar again. This left the pound on a weaker 1.6150, sliding back in the direction of the $1.60 barrier again. It didn’t quite make it back that far before the second week of August ended, but it did finish up on 1.6260. This at least was a slight improvement and a very welcome one too.

So it would seem the pound has more work to do if it can hope to capitalise on the rocky situation in the US at the moment. Perhaps things are rocky enough in our own country and this is why we can’t do as well as we’d hoped.