The FED President of New York has stated that a full blown trade war between the US and China would cause major problems for the US; its 'safe haven' status could come into question with the constant instability caused by Trump since he became President. The table below shows the difference in US Dollar you could have achieved when buying £200,00.00 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
Since Donald Trump became President the US dollar has been on a sharp decline. His constant call for change causes investors to get the jitters and therefore there is an argument that the US dollar is not seen as a safe haven like it once was. Earlier in the week Mr Trump puzzled many economists when he took to his twitter account to state China and Russia are trying to devalue their own currencies.
This was a strange move by the President as the Chinese currency has risen in value by 3.6% against the US dollar since the start of the year. A few months ago a member of Trumps administration insinuated that the US are happy with a weaker dollar and his recent comments have led many economists to suggest that it’s only a matter of time until the President artificially devalues the dollar in a bid to reduce the US trade deficit.
In recent weeks Donald Trump’s administration announced that they could impose $150 billion worth of tariffs on Chinese imports as they feel the US are losing billions of dollars to China due to the tariffs that are in place at present. The US and China will continue to negotiate in the weeks to come however other key officials are now starting to comment. Federal Reserve Bank of New York President has warned that a full blown trade war will cause major problems for the US moving forward and no country will benefit or win a trade war. The President also went on to say that interest rates should increase gradually in the upcoming 12 months however trade wars have the potential to stop this from occurring which would therefore suggest the US dollar could devalue further.
In addition the Managing Director of the International Monetary Fund Christine Legarde has waded into the trade wars debate yesterday by announcing that the biggest problem the trade wars could create is global confidence and investment to fall. For clients holding onto US dollars Donald Trump and trade wars I believe will continue to devalue the US dollar short to medium term, consequently I expect GBPUSD exchange rates to head towards 1.50 by the end of the summer.
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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