GBP/USD rates are still very close to their lowest levels in 31 years as the US economy proves to be going from strength to strength. Third quarter GDP figures were better than expected and came out as 2.9% compared to the expectation of 2.5% and this supports the argument that the US Federal Reserve are ready to raise interest rates. Although the Fed are independent of the US government to me it seems pretty clear that the central bank will not change monetary policy during this period until the US has formed its new government.
With Clinton and Trump still very close in the polls I think this could go down to the wire.
Hillary Clinton was cleared back in July of any criminality relating to emails during her time as secretary of state and with just ten days to go before the US goes to the polls this latest setback could cause some voters to change their minds. According to some sources 80% of Republicans agreed with the Trump statement that the email scandal is ‘bigger than Watergate.’
Typically when an election is very close to call this often results in a weakening of the currency. However, as the US Dollar is used as a safe haven currency this has seen the Dollar strengthen vs both the Pound and the Euro. With the US economy also improving this is causing more investment in the world’s leading economy.
As mentioned previously I think the Fed are justified in raising rates but I think this week I would be amazed to see any change. Any suggestions that a rate rise is coming in the near future could see GBP/USD rates fall to below 1.20 on the Inter-bank level.
US Non-Farm Payroll data is due on Friday afternoon and as the jobs market has been extremely positive during 2016 I expect this data to continue to remain strong. If it does come out better than expected then this could be another justification for the Federal Reserve raising rates this side of Christmas on 16th December.
Since the start of October GBP/USD exchange rates have dropped by as much as 10 cents from the high to the low or the difference of £13,300 on a currency transfer to USD 200,000 and this was due to the announcement that Article 50 will be triggered by March 2017.
If you’re in the process of sending funds to the US or need to buy US Dollars before the end of the year and worried about the uncertainty ahead if you don’t have the full availability of funds then speak to your account manager about the process of how a forward contract could work for you.
With the potential for a US rate hike in the weeks ahead, clients holding Sterling for US Dollars may want to consider discussing your requirements with one of our brokers. Call our trading floor on 01494 725 353.
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