Will US Dollar strength continue?

The US was celebrating Thanksgiving yesterday so the markets remained relatively quiet between Sterling and the US Dollar. However, on Wednesday the FOMC minutes showed that the appetite is increasing for an interest rate hike when the Federal Reserve meet on 14th December. The minutes confirmed that ‘it could well become appropriate to raise the target range for the federal funds rate relatively soon.’

With the US economy going from strength to strength recently highlighted by improving Unemployment data as well as strong Durable Goods data this week to me it is just a matter of time before the US raises interest rates.

On Tuesday US GDP data for the third quarter is released and I think this will provide further support for an interest rate hike and I would not be surprised to see Pound to US Dollar exchange rates challenge 1.20 or even below prior to the end of the year. Since Trump was elected Pound to US Dollar rates have remained in a fairly tight range but with the uncertainty of what is happening politically in the UK, the problems in Europe and a possible interest rate hike I think we could see further Dollar strength before the end of this year.

We end next week with arguably the biggest economic data release in the form of US Non-Farm Payroll data. US unemployment data is also released on Friday with expectations for 4.9% which is better than both the UK and the Eurozone and I think this will be the final evidence needed for the Fed to raise interest rates in December.

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. Alternatively, you can email me at teh@currencies.co.uk.

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