You may be asking yourself, why do I need to understand the latest trends in the US Dollar, and the Pound? In the coming months, the US Dollar is expected to rally against all of its major trading partners, causing a significant shock to the global financial system. If you are an investor in the UK, you need to know what trends to watch out for, to protect your wealth and save money in the process.
During the past six months, the Pound has been experiencing a great deal of volatility, with many large purchases, large sales, and large drops. The decline in the Pound has been accelerated as many European countries have devalued their currencies, encouraging the US Dollar to rise. As a result, the GBP has suffered tremendously.
One key area to consider is large purchases of UK government bonds. The fall in the Pound has encouraged foreign investors to make large purchases of UK government bonds. Many international investors have purchased large quantities of the UK bonds and are now holding them to earn interest rates, earning a return on their investment in the form of a little more foreign currency.
While it’s too early to tell what trend will take hold, foreign investors are making major purchases of British government bonds at a time when many would-be buyers are running out of buying opportunities. This is another indicator that one of the factors affecting the Pound is the anticipated weakening of the European Central Bank.
This is not surprising, as the European Central Bank will soon begin to weaken the Euro to keep its own economy afloat. The European Central Bank will do whatever it takes to avoid a further breakdown of the Euro and will continue to hold the Euro, allowing the Pound to depreciate against its major trading partners.
If you want to protect your wealth, there are several factors that you should consider. Protecting your portfolio against price changes in the US Dollar, and the Pound is just one of the many aspects of investing that will help you achieve your goals.
It is important to understand that there are two aspects to foreign exchange. There is the actual exchange rate that you face, and then there is the risk of currency fluctuations. Understanding how these are related, and how to manage the risk of currency risks is just as important as understanding the benefits of the exchange rate.
Most people that trade currencies buy only one currency, the US Dollar. Most of us invest in multiple currencies, but still, the US Dollar remains the number one currency and when the economy of the US Dollar starts to slow down, we begin to trade in other currencies, such as the Australian Dollar, the Canadian Dollar, and the Euro.
Understanding the risk factors and potential currencies are key to protecting your investments, and understanding currency trading strategies that are effective against these risks. There are some excellent resources available to you on the internet and by reading through them you can learn how to use charts of the past to identify currencies that are likely to gain or lose value.
Since most investors trade currencies, it’s no surprise that the most aggressive currency traders are typically those who hold the most of these currencies, but they also include those who are strong long term holders of these currencies. Just knowing what to look for, and how to trade the currency markets effectively, will increase your chances of making a profit.
Investing in foreign exchange is a highly specialized activity, and there are several resources available online that can give you a complete overview of the trends and trading strategies that you can use to protect your investments. If you are new to the foreign exchange markets, or you are looking to get started, the wealth management service that is offered by Charles Stanley Financial Services can provide you with essential knowledge about currencies and the currency markets.