The US Dollar is too strong according to President Trump, and the potential for further US interest rate hikes this year will likely bring about further US Dollar strength. Given the promises made in 2016, will the FED fulfill their promises in 2017?

Currency Pair% ChangeDifference on £200,000
GBP/USD0.56.%$1400

Will there be a US rate hike in March?

federal reserve buildingChair of the Board of Governors at the Federal Reserve, Janet Yellen has stated that the Fed is on course for further interest hikes during 2017. She has said it would be “unwise” to wait too long to tighten policy.

Yellen said that continued employment growth and increasing inflation were like to cause a “further adjustment of the federal funds rate.”.

“Waiting too long to remove accommodation would be unwise, potentially requiring policy makers to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession.”

It should however be noted that Trump has recently stated that the high value US Dollar is hindering growth, a hike would not help the situation.
Trump’s reign as President will certainly not be a boring one. Yellen put it mildly. “There would be considerable uncertainty surrounding the economic outlook amid possible changes in US fiscal and other policies” following Trumps election as President.

I take forward guidance with a pinch of salt, it would not be the first time Yellen has indicated rate hikes without delivering and with the unpredictability of Trump it would not surprise me if the hike did not take place in March.

GBP/USD – When should I trade?

If you have a medium to long term US dollar requirement. I would be tempted to trade a small tranche to protect myself in the event of the rate hikes and then to hang fire and use a limit order in an attempt to maximise the return on my trade. A limit order is when you set a target rate and when that rate becomes available, your order is automatically purchased when that rate becomes available. If the rate seems unobtainable, the order can be cancelled or amended to adapt to the new market conditions. It is a very useful tool to have in a trader’s arsenal.

Short term US Dollar buyers will need a broker keeping an eye on the market to assist in timing your trade during such a volatile period it would be very unwise to trade without expert assistance due to the uncertainty surrounding Brexit.

If you are a US Dollar seller I would take advantage of current levels while close to a 31-year high. There is no need to be greedy, remember what happened to Midas! Call us on 01494 725 353 or email me here to get a free quote.