The US Dollar has been increasing in value over the past few weeks; the FED have increased treasury bond yields to above 3.0% which tends to be an indication of an increase rate hike on the horizon. This report discusses how this could affect the US Dollar in the coming months. The table below shows the difference in US Dollars you could have achieved when buying £200,000.00 during the high and low points of the past week.
|Currency Pair||% Change||Difference on £200,000|
The US Dollar has been climbing higher over recent weeks as expectations over inflation have grown. This trend has been demonstrated by the FED increasing Treasury bond yields to above 3.0%.
A raise in yields generally nods towards higher interest rates. This is good news for the Dollar as it becomes more appetising to investors of foreign capital. This is a key reason why the dollar has such historic popularity.
Continuing with this market view, the focus on yields isn’t likely to stray as the FED is scheduled to release the discussion and key talking points from its recent interest rate meeting, in the form of the publication of minutes Wednesday.
The other principal economic data release for the Dollar this week is the initial estimate for the Purchasing Manager Indices in Manufacturing and Services for May, also due to be released on Wednesday.
PMI's are surveys that aim to assess the level of activity in key sectors. Each response is weighted based on the size of the company it has been received from. A positive consensus here would bode well for further growth.
Following in depth discussions to bring balance to the two countries trade exchanges, the US motioned to encourage China to buy $200bn worth of goods and services thus reducing the imbalance.
With Chinas hands tied under threat of $150bn worth of tariffs they were all too happy to oblige in what was described as a ‘win win’.
With the twos days of talks reaching a conclusion last Friday it would appear the two powers have stood down for now. Provided China holds true to its word the dollar will likely see further strength as it regains its solid footing.
Without positive data this week the pound will be playing catch up with the dollar as the greenback continues to compile data in its favour. If the GBP data releases proceed to push interest rate hikes to the horizon whilst the USD shows promise of multiple hikes it is likely the pound will lose further ground. Anyone looking to buy USD may wish to act before losing further ground.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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