The race for the White House now only has a matter of weeks left and there have been a number of wild speculations on the impact to the currency market. Generally speaking the impacts have at this point been negative as the political uncertainty has driven speculators to buy the USD making it more expensive to buy. Plus in either case if Clinton or Trump is elected it becomes increasingly clear that interest rates in the US will start to climb thereafter. Any interest rate hike will push up the value of the currency in question so generally I expect buying US Dollar to become more and more expensive.
The only change however will be by how much and I think this in turn will be driven by who comes out victorious. Even though the Federal Reserve is supposed to be impartial from government the wilder financial impacts from a Trump victory is expected to result in more interest rate hikes in quicker intervals. As a result, who is in the lead will have an impact on this variable and should therefore be keenly watched by anyone with USD to buy.
Currently Hilary Clinton leads Donald Trump by 45.5% to 39.2% in the national polls, US pollsters have estimates the probability of a Trump victory at 14.1% or 18% by UK bookmaker Paddy Power whereas it was at a peak of almost 50% in late September.
Data releases from the US will continue to have an impact on the price for buying or selling the USD. This week we have a number of releases including Consumer Confidence this afternoon, House Sales tomorrow, Durable Goods on Thursday and GDP figures to end the week on Friday. Generally these are expected to continue to show improvements and therefore drive the value of the USD up. Today’s release is perhaps the one to pin hopes on if you are a USD buyer. Consumer spending is expected to show a slight contraction therefore giving some USD weakness perhaps. Consumer confidence has been growing in recent months and reached a nine year high last month in line with unemployment which is also falling across the Unitied States. Household spending accounts for a majority of U.S economic activity and shows no sign of slowing down.
If you are buying USD in the next 3 weeks I personally would be buying sooner rather than later, especially with the pending UK data this week which is expected to continue to add presure on the UK Pound.
If indeed you have a USD requirement but don’t have access to your full funds don’t ignore the option of a Forward Contract which allows you to lock in the rate of exchange for a future date if a deposit is available.
Whilst the markets have priced in a Clinton victory, clients should prepare themselves in the event a Trump victory was to materialise. Call our brokers today on 01494 725 353 if you would like to discuss your options.