At the end of last week, jobs data from the US highlighted a significant fall in growth which has resulted in a cloud of uncertainty hanging over the world’s largest economy. Couple this with the ongoing trade tensions with China and the outlook for the global economy looks bleak at present. As such we have seen the USD strengthen against sterling, whilst commodity-based currencies such as the AUD have struggled, as investors look towards safe havens for their funds.

Currency Pair% Change (Month)Difference on £200,000
GBPUSD4.0%$10,000

Overall the US economy has been holding its own of late, but following the disappointing jobs data last week, the Fed look likely to cut interest rates in July to help keep the economy afloat in these volatile conditions. For any clients who have an upcoming currency requirement, tomorrow’s inflation data from the US at 13:30 should be watched with interest. Recent inflation data from the US has been resilient, but if there is any fall highlighted tomorrow then the chances of a rate cut from the Federal Reserve are likely to increase dramatically.

US durable goods drop, Fed likely to cut next week

How would the USD react to a rate cut?

Typically, when a Central Bank announces a cut in interest rates the currency in question may weaken as investors will be put off holding their funds where they will see a dip in returns. However, with so much global uncertainty at present, we could even see the dollar gain in value if the Fed announce a rate cut, or the chances of this happening in July start to look more likely in the weeks to come.

If you have an upcoming USD requirement, or a pending need involving any major currency, keep in touch with your account manager who can keep you up to speed with how this week’s data and news is affecting the currency market.

The US and China are currently locked in a trade war that is continuing to weigh on the global economy, but the US have made trade breakthroughs elsewhere this week, after a migrant deal was agreed with Mexico to reduce the number of migrants crossing the border in to the US, which therefore stopped Trump imposing tariffs that he had previously pledged, if Mexico were unwilling to cooperate on this issue. Although he has come under some criticism for the deal, it does show that he is willing to negotiate and could bode well for future agreements with China.

Looking further ahead this week in terms of data there are further jobs numbers to be released, as well as retail sales figures on Friday. Both data sets are likely to play a part in the Fed’s decision on interest rate policy, so are worth keeping a close eye on. There may also be comments from Federal Reserve Bank members this week regarding their opinions on monetary policy and any comments are likely to create currency market volatility.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.