The major market rumblings of late summer means now is a good time to take another look at one of the most widely followed currency pairs. We last looked at the pound versus the US dollar exchange rate (GBP/USD) in the 23 July issue (Forex, Shares, 23 Jul). The view then was that the pound was unlikely to be surpassing the 1.6 level any time soon and this has proved to be the case. But it has ended up maybe a little weaker than expected, slipping back below 1.52, revisiting levels from early June.

If you are reading this edition of Shares on the morning of publication (10 Sep) you are probably eagerly awaiting the Bank of England interest rate decision at midday. Gazing into the forex crystal ball I can predict no change -this is hardly a risky forecast but that does not mean that the announcement is not without its relevance. The Bank has now started releasing the minutes of the rate setting meeting simultaneously with the rate decision. Up until last month, markets had to wait almost two weeks to see the minutes, but this has now changed. In recent months it is those meeting notes that have had the bigger impact on short-term moves in the pound, as traders get to see whether the committee's appetite for a rate hike is increasing. China wobbles aside, it is the future of interest rates that forex markets are focusing on now - and trying to second guess when they will start to move.

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It could be argued that the United States is still the one to watch for clues as to when interest rates finally beginning to normalise from record lows and it does seem inconceivable that the UK would move in isolation. At the moment, expectations are that the US will raise rates in December of this year with many forecasting the UK will follow suit as early as February 2016. All of this does assume that economies carry on as they are - another burst of China-inspired volatility could always end up swaying the opinions and actions of the central bankers.

Those China nerves have weighed on the pound over the last couple of weeks. The US dollar has become something of a safe haven in recent years which explains why GBP/USD dropped around 600 points (6 cents) towards the end of August. This is a fairly dramatic drop based on typical volatility for the pound but it does not really change the bigger picture and perhaps even offers an opportunity for the patient trader.

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The downtrend that drove the pound lower into April this year is over and the last few months have seen sentiment shift. As mentioned in previous issues, the story for GBP/USD does seem to be one of pound recovery from here, so shock sell-offs can be used as an opportunity to get in at better prices.

As GBP/USD rebounded from those April lows, it had the odd pause along the way, leaving some important points on the chart. The early May lows in the 1.51 area held the market just before it spring boarded up to 1.58 in fairly short-order. Beneath that, the late April lows ahead of 1.4850 are expected to be strong support if the GBP/USD weakness continues in the near-term. The Chinese volatility has increased nerves in markets but has not yet at least drastically changed the underlying fundamentals. Buying GBP/USD on dips stills seem to be more logical side of the market with 1.4850/1.5100 as a floor.