The Fed's interest rate decision is due out later today, with a rate hike widely expected. Markets seem to have factored this in already to an extent as the Dollar climbed throughout the day yesterday. This market report discusses the ways this is likely to affect exchange rates in the coming weeks. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points over the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
One of the main headlines throughout the day yesterday that has caused controversy over the Brexit vote and Donald Trump’s election victory is the link between a UK Political data firm, Cambridge Analytica, and Tech giants Facebook and how it is believed that together they could have affected the outcome of these huge events. It has been claimed that Cambridge Analytica harvested the data of 50 million Facebook users without permission, refusing to delete it when asked to and using this information to promote ‘fake news’ and mislead voters before the EU referendum and most recent US election. Although we have seen a muted effect on the currency market, we have already seen $37bn wiped from Facebook’s market value and if Donald Trump’s victory comes under further scrutiny then we could see an impact on the currency market as a result. Any clients who have an upcoming USD transfer should certainly keep an eye on this story as it unfolds.
In the more near term as far as rate movement is concerned, this evening’s Interest rate decision from the Federal Reserve, which is new Chairman Jerome Powell’s first since his appointment, could pave the way for the next trend for the USD. Over the course of yesterday’s trading, we saw the Dollar make gains against the Pound, as I believe that investors are betting on the chances of the Federal Reserve raising rates this evening, which is now looking highly likely. What will also be interesting is Jerome Powell’s press conference after the announcement as his sentiment should give us some clues as to the pace of which the Fed plans to raise rates throughout this year and whether or not they are due to stick to their previous plans under Janet Yellen of four rate hikes this year.
I believe that this is also priced in to the current value of the Dollar, so if he fails to guide the markets to four hikes this year then we could see the Dollar come under some pressure. As this event is outside of our usual trading hours, clients may be sensible to plan for this data release in advance by speaking with their account manager here this morning. A limit order can often be used to great effect in these scenarios, allowing you to specify a ‘target’ rate of exchange that allows our systems to purchase your currency automatically even when our office is closed.
Friday this week could also create some volatility on USD rates with durable goods orders released at 12.30. This data release measures the number of orders received for manufactured goods designed to last for more than 3 years such as cars and kitchen appliances, and therefore give a good indication in to consumer appetite for spending and therefore the overall state of the economy.
The figures are set to show an improvement on the previous data set so could provide a boost for the Dollar. In the meantime, Donald Trump is expected to announce up to $60bn in tariffs on Chinese exports by Friday this week in his continued attempts to ‘Put America First’ and decrease their trade deficit. There are some fears in the media that this could spark a trade war and added global uncertainty, which is likely to create further volatility on exchange rates.
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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