The US Dollar fell to its lowest level against the Pound since July yesterday after Inflation readings for the US were released lower than had been anticipated. The USD fell by 0.7% against the Pound and 0.6% against the Euro over the course of the day, and provided clients looking to purchase US Dollars with the best opportunity to do so in 6 weeks. The below Dollar report discusses the reasoning behind this weakness in light of changes to global trade tensions, with the table showing the range of cable exchange rates over the high and low trading points of the past month.

Currency Pair% ChangeDifference on £200,000
GBPUSD3.5%$9,000
US hit with lacklustre Inflation level causes USD weakness

Inflation fell in August to 2.2%, down from July’s best performance since September 2008 of 2.4%, and missed expectations caused investors to move their funds out of the US Dollar. The Federal Reserve watch the rate of inflation closely when determining future Interest Rate changes, and Wednesday's poorer than expected Producer Price Index release, which fell for the first time in a year, will have also caught their attention.

Although this news is unlikely to deter them from their expected rate hikes (the FED have currently pencilled in 5 hikes by the end of next year), it could certainly be something which will be monitored and could mean that Interest Rates aren’t adjusted at the rate in which the FED had originally hoped for.

Easing trade tensions pull investors away from the safe haven Greenback

Another factor to the US Dollar weaning for the fourth consecutive day against the Pound and Euro is that trade tensions seem to be softening between the US and China, after the US reached out to restart trade talks with Beijing. The US Dollar has been the main currency to benefit from the mounting global trade concerns lately, as a safe haven currency which attracts investors in times of uncertainty, so the positive discussions have given Investors’ confidence to move their funds away from the US Dollar once again.

This afternoon brings the release of Retail Sales figures for August at 1.30pm which are expected to dip from 0.5% to 0.4%, however would still be viewed as solid growth. As Retail Sales are closely linked to Consumer confidence, spending and Inflation, and considering yesterday’s poor inflation readings, this could make this a key mover for US Dollar exchange rates. Clients looking to sell US Dollars may wish to move ahead of this announcement to remove the risk from any further potential losses.

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.