The potential trade war being discussed as a result of Trump's import tax plan could see the USD strengthen, as a safe haven currency investors tend to move funds to the Dollar in times of global uncertainty. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low trading points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The US Dollar has recently been rising as markets predict further interest rate rises for the US and also becaude of investors’ concerns over any Trade Wars. The US Dollar is a safe haven currency which will in times of global uncertainty, strengthen.
At present there are some pressing arguments for the US Dollar to rise after a period of weakness. GBPUSD rates have been sat below 1.40 for over a week and any move higher, back over 1.40, will take some change in sentiment for both the US Dollar and the Pound
An escalation in the concerns over a Trade War could easily see the Dollar rise further as it reflects the kind of uncertainty which is so closely linked to a stronger Dollar. However, this might all just be rhetoric from Trump that like most of his other grand statements don’t end up quite as damaging as we first believe. The potential for volatility on the dollar is however high so clients looking to buy or sell US dollars should keep up to date with this ongoing story.
The key release of the week for the US Dollar will be Friday’s NFPR (Non-Farm Payroll) and Unemployment data. This release is a key piece of data analysed by the Federal Reserve who are expected to raise US interest rates further this month.
US Unemployment is currently at 4.1% which with increasing economic growth encourages the Fed to raise interest rates. Rising interest rates will often see the currency concerned stronger although the US Dollar may not improve much further on good news. With much of the expectation ‘priced in’ for the interest rate hike, the real movement might come from surprise poor figures which could see the US Dollar weaker.
GBPUSD is struggling to get back above 1.40 on the news from the UK and its continuing poor handling of Brexit. Investors remain sceptical about the future direction on the Pound but we could be in for a choppy couple of weeks as investors try to make sense of the news.
March 21st sees the next US interest rate decision and the 22-23rd is the next EU Summit where the UK is predicted to finalise the transitional deal for Brexit, to lay down clearly what kind of future deal will take over once the UK technically leaves the EU on Brexit day 29th March 2019.
Such uncertainty on Sterling and continued economic dominance from the US should see the US Dollar finding favour against the pound. If you have US dollars to buy timing a transaction on any spike seems the best way forward to me in this market.
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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