Question

What are the prospects for the US$ and UK sterling over the following two years? What implications does this have for the UAE Dirham?

Answer 1

The U.S. economic outlook is healthy according to the key economic indicators. The GDP growth rate is expected to remain between the 2 percent to 3 percent ideal range. U.S. GDP growth will slow to 2.3 percent in 2019 from 3 percent in 2018. It will be 2 percent in 2020, and 1.8 percent in 2021. The unemployment rate ends the year at 3.7 percent in 2018. It will fall to 3.5 percent in 2019, and rise slightly to 3.6 percent in 2020, and 3.8 percent in 2021. That's lower than the Fed's 6.7 percent target. The oil market is still responding to the impact of U.S. shale oil production. That reduced oil prices by 25 percent in 2014 and 2015.

Whereas, the GBP/USD rate appears to be hitting a slight level of resistance up in the 1.33s. If the Pound can have a final push this week then we may find that it pushes through and up closer to the 1.35 level, which we have not seen since early 2018. Should the Fed now be tightening their policy and the rate hikes start to slow in 2019 then the Dollar may also start to soften too. This could be another reason why I feel that GBP/USD exchange rates have more chance of climbing rather than falling in the near future.

Sterling’s slump after the shock European Union referendum result in June 2016 handed UAE-based expatriates an unmissable chance to send money to the United Kingdom at favorable exchange rates.

That opportunity appeared to have faded as the pound strengthened more than 10 percent over the last year, amid growing hopes the UK would strike a satisfactory deal with the EU.

However, Brexit uncertainty is back with a vengeance amid political divisions and the pound has slipped again, giving UAE expats another opportunity.