Trumps promises to implement a wall around Mexico, improve the healthcare system and limit immigration have not come to fruition. Markets continue to lose hope in the President and the US Dollar.

US Congress avoids a shutdown

With the Pound hitting close to 1.30 to buy US Dollars recently we are seeing signs of a slowdown in the world’s largest economy. US GDP data which came out on Friday showed annualised growth of just 0.7% which is much lower than Trump’s claims during his election campaign that the US would see growth of 4% during his time. Clearly he has only been in power for 3 months but with the US posting their lowest growth levels in 3 years things are not going as well as expected in the US.

Late on Sunday night Congress has agreed to keep the government running until 30th September but has allocated nothing to Trump’s plans to build a wall between the US and Mexico. However, a total of US$1.5bn has been allocated towards border security. Many shutdowns have happened before but this is the first one of its type since 2013, which lasted over 2 weeks.

Trump also originally wanted US$30bn for his budget blueprint for defence spending but he has only been granted US12.5bn. The good thing for Trump is that the US has avoided another shutdown which would be embarrassing for the new President but it still shows how difficult it will be for him to carry out his election campaign pledges.

US Fed Outlook

Negative US data to impact the US Dollar

Indeed, yesterday’s data showed a big fall in both Construction Spending in March as well as the ISM Manufacturing PMI data which is a measure for business conditions in the manufacturing sector. The expectation was for 56.5 but it came out at just 54.8. Anything below 50 is seen as negative.

Tomorrow evening the Federal Reserve will hold its latest interest rate decision immediately followed by a statement. I do not expect to see any change in interest rates at the moment and I think the accompanying statement could be a little less optimistic than in recent months especially when you consider the drop in US GDP recently.

This could present a opportunity for the Pound going in an upwards direction against the US Dollar so if you’re thinking about buying US Dollars it would be worth keeping a close eye on what happens tomorrow night.

Indeed, even though our trading lines are closed whilst the announcement is made it may be worth placing a Limit Order which allows you to set a pre-determined rate which is automatically triggered is we are able to buy at your desired rate. This is particular useful when markets can move quickly outside trading hours.

We end the week with what could arguably be the biggest driver for US Dollar exchange rates this month with the key data release of both US unemployment data as well as US Non-Farm Payrolls. I think as we have seen a slowdown already with US GDP I would not be surprised to see another negative announcement from the US and this could see GBP/USD rates even higher than current levels.

If Trump continues to show little signs of fulfilling his campaign promises, markets will continue to lose faith in the US Dollar. Speak to a member of our team on 01494 725353 or email me here if you have a US Dollar buying or selling requirement.

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